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Large Corporations Leasing More Space from Co-Working Providers

CoStar Market Insights: National Trend on the Rise Across South Florida
April 23, 2018

Two Brickell City Centre is just one of several buildings in Downtown Miami where large corporations have signed short-term, flexible leases with co-working space providers.

Co-working options – offered by shared office space providers such as WeWork, Axis and Quest – are on the rise in Miami. The Miami Downtown Development Authority (DDA) reports at least 30 co-working spaces have popped up in downtown Miami alone and have attracted a number of large corporations as tenants. Twitter, Spotify, TripAdvisor, Microsoft and Wix have all taken shared office space there in the last few years.

Just recently, Royal Caribbean placed 200 employees in the WeWork shared office in the Security Building on 1st Ave. where the co-working firm operates a 90,000-square-foot space. WeWork also leased more than 64,000 square feet in the new Two Brickell City Centre in keeping with its strategy of leasing large blocks of space capable of housing a substantial number of employees from a larger size firm.

NAIOP, an association representing commercial real estate developers and investors, recently published its office space demand forecast which noted the impact from this trend of more Fortune 500 firms seeking short term or flexible arrangements by taking space in co-working offices.

The NAIOP report noted how this can obscure the actual amount of available space in the market, since the space is technically leased by the co-working firm. It also means that the co-working firms may be capturing some additional spread in profit that would have previously been reported by landlords, especially in a rapidly rising rent environment such as we’ve seen over the last three years in Miami.

Overall, the impact of co-working space on the South Florida market is still minimal. The total amount of space leased to co-working firms in the core downtown Miami and Brickell submarkets is less than 400,000 square feet, according to CoStar data. Despite their high rate of growth, this represents only 1.7 percent of existing total office inventory.

However, with these spaces becoming increasingly utilized by larger firms and not just the smaller tech or start-up companies typically associated with the industry, it is worth watching the impact these trends have on office leasing data going forward.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

Pamela Stergios, market analyst covering the South Florida market.

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