The Financial Impacts of Coworking: Rental Prices and Market Dynamics in the Commercial Office Market

43 Pages Posted: 14 Nov 2019 Last revised: 27 Nov 2019

See all articles by Andrea Chegut

Andrea Chegut

Massachusetts Institute of Technology

Mike Langen

Maastricht University - Department of Finance

Date Written: October 31, 2019

Abstract

Coworking providers, like WeWork, have shifted the competitive landscape for office tenants through differentiating office amenities, leasing fully-equipped desks or offices over flexible time periods. However, even though coworking providers are a tenant type in consumer demand, little is known about the strategic interaction of this growing tenant with landlords in the real estate sector. In this paper, we assess landlord-coworking provider interaction through lease contract valuation, assessing if landlords see coworking providers as a substitute, benefit or risk, compared to other tenants. Using lease contracts from six US cities between 2008 to 2018, we compare rent conditions between coworking providers and tenants within the same building. We document that landlords treat coworking providers as substitutes not differentiating in effective rent compared to other tenants. Coworking providers take systematically longer lease durations, resulting in higher tenant incentives, such as free rent periods and tenant improvement concessions. Controlling for lease duration, coworking providers receive significantly more tenant concessions. We do not find value-increasing external effects of coworking providers, concluding that landlords are indifferent towards coworking tenants.

Keywords: Coworking, Shared office, Hotdesking, Commercial Real Estate

JEL Classification: R33, R39, 033

Suggested Citation

Chegut, Andrea and Langen, Mike, The Financial Impacts of Coworking: Rental Prices and Market Dynamics in the Commercial Office Market (October 31, 2019). Available at SSRN: https://ssrn.com/abstract=3481142 or http://dx.doi.org/10.2139/ssrn.3481142

Andrea Chegut

Massachusetts Institute of Technology ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

HOME PAGE: http://https://web.mit.edu

Mike Langen (Contact Author)

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
256
Abstract Views
552
rank
125,448
PlumX Metrics