This is the third article of our Price Heat Map Series 2017. The first article of this series explained our methodology & outlined coworking trends around the world. Our second article analyzed the most recent trends in the Hong Kong coworking ecosystem.
The USA is a HUGE coworking market, with an approximate aggregate of 27 million square feet of shared workspace. Americans also have a strong appetite for coworking spaces and are willing to pay ~180% more for such spaces as compared to commercial offices. Why are users of shared workspaces willing to pay more? According to Forbes, the rationale is simple: increased flexibility, less responsibility, all of the amenities are included, networking opportunities & support. Furthermore, a 2015 report from the US Government Accountability Office concluded that ~40% of the American workforce are independent contractors, freelancers, or are not otherwise traditionally employed. Consequently, we’re seeing demand for shared workspace rising in the States. Fun Fact: It’s not just coworking spaces that offer these benefits. Another great option to consider is coworking cafes!
Now that we understand why people in the US, especially millennials, are obsessed with coworking, we come to the important questions: how much does it cost and is there any observable trend? The colors of the circles in the map below depict the average monthly prices of a dedicated desk, a consistently available price point in major cities.
Our analysis indicates the average monthly cost of a dedicated desk in the US is ~450 USD. Does this number ‘mean’ much? (Pun intended) Not really.
What are the three most important determinants of real estate prices? Location, location & location. The cost of coworking in the US depends a great deal on which city you’re in. You can find prices as low as ~250 USD in Dallas, Texas, and prices as high as ~600 USD in San Francisco. Our models also show high variation of prices within cities, depending on whether the space is on a prestigious street or in a nice neighborhood with a good view.
San Francisco & New York
Our analysis shows that average prices in San Francisco & New York (>520 USD) are similar, with the former being marginally more expensive. Both are in the top 20 most expensive cities in the world or among the top 10 in the US in terms of cost of living, which explains the high cost of coworking there. Fun Fact: You can get nearly 2 years of dedicated desk space in Toronto for just 1 year in NYC!
Los Angeles (~460 USD) and San Diego (~480 USD) are the closest startup hubs to San Francisco. Though a bit less expensive than San Francisco, we don’t recommend moving to Los Angeles because of horrendous traffic. Due to high costs in San Francisco, we recommend our technology start-up clients to move to the ‘next in tech’ cities for managing their operations, while maintaining a sales team in the valley.
Seattle
Though Seattle falls within the top 10 most expensive cities to live in on the US mainland in 2017, our research indicates lower average coworking prices (~360 USD) than expected. Why is this the case? Firstly, coworking spaces in Seattle often offer amenities as an ‘add on’ to the basic membership cost. So the actual cost might be 10%-20% more than the average cost if you want a locker or an individual access pass. Secondly, Seattle has a lot of ‘creative labs’ and ‘makers spaces’ which offer coworking at cheaper prices as they are often set-up and funded to promote start-ups & entrepreneurship. If you decide to cowork in Seattle, look out for incubation programs run by the University of Washington and other community colleges!
‘Next in Tech’ Cities
Many reports and sources indicate that apart from San Francisco, San Jose, New York, Boston & Seattle, the ‘next in tech’ cities are Denver, Atlanta, Portland and Washington DC, Chicago, Philadelphia and Miami.
On the east coast, Washington DC is priced ~400 USD. This rate makes sense given the high cost of commercial property in the political capital, and also because most coworking spaces in the city are within 1 mile of Constitution Avenue. Property doesn’t get more prime than that!
Atlanta (~360 USD) has a lot of coworking spaces and a great deal of potential because of its deep startup ecosystem, and lets not forget the city is home to Georgia Tech! If you’re involved with FinTech, take a stroll down Transaction Alley!
There’s a high concentration of coworking spaces in Miami (~400 USD), especially along Biscayne Boulevard. It’s an absolutely stunning area with tons of restaurants & shops, justifying a small premium. Don’t be fooled by how pretty it is there. Miami isn’t all fun & games, given that the Kauffman Index recently named it the second most entrepreneurial city in the US.
Lets make an unusual comparison. The average cost of a monthly dedicated desk in Chicago is ~340 USD. For the very same services in Denver, you end up paying ~420 USD. Now, digest the fact that commercial property costs in Chicago are slightly higher on average than Denver. Why is coworking in Denver ~25% more expensive? Well, our analysis indicates that although the cost of commercial property is a key underlying factor in determining the cost of coworking in any particular city, it isn’t the only factor that affects prices. There’s higher demand for coworking in Denver due to the immense amount of tech & investment activity there.
Other Cities
We’ve found some of the cheapest coworking prices in Houston, Texas, coming in at ~300 USD, because of the low cost of living there compared to the ‘next in tech’ cities. We’re projecting that prices will increase as Houston becomes a more ‘happening’ start-up hub & Texas starts offering more tax benefits to SME’s. Austin is a hotbed for startups. The Kauffman Index found that its startups grew faster than any other city in the US in 2016, leaving aside Washington DC. If not for work, go to Texas for the ribs!
In general, our analysis has found that all ‘start-up hubs’ and ‘next in tech’ cities, excluding San Francisco, NYC & LA, are generally priced ~350-420 USD per month per dedicated desk. To keep costs in control without compromising the future of their startups, we advise founders to keep a connection to the valley, be it a small sales team or regular visits, to take their business to the next level.
The Future of Work
The USA continues & will continue to be a major coworking market. With accelerated growth in this sector, we might see more and more unicorns and increased investment. Our bet is that the coworking landscape will be a lot different next year. Stay tuned!
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