Coworking is booming. The industry is growing and hybridizing so fast, we're having a hard time keeping up with it.
We recently released our 2016 coworking forecast and we are projecting continued rapid growth over the next 4 years, although at a slower rate than the industry's current dizzying pace.
As the chart below shows, we expect the number of global coworking spaces will grow from a bit over 11,000 this year to just over 26,000 in 2020.
For those with a statistical bent, this is a compounded annual growth rate of 23.8%.
We expect the number of global coworking members to increase from about 976,000 in 2016 to just over 3.8 million in 2020.
This is a 41% compounded annual growth rate.
The member growth forecast is higher than the space forecast because coworking spaces are getting bigger, both in size and number of members:
- new spaces tend to be much larger than older spaces.
- existing spaces are expanding by adding more space and members.
- coworking facility operators continue to figure out how to serve more members per square foot of space.
- spaces outside of the U.S. tend to be smaller than U.S. spaces, but the gap has been closing and will likely continue to close.
According to Deskmag, the average number of members per space roughly doubled over the past two years. We see this trend continuing, but at a lower rate. We're forecasting a 77% increase in the average number of members per space over the next 4 years.
The forecast shows coworking space and member growth slowing steadily over the forecast period.
The number of spaces are forecast to grow 18% in 2020, down from a 41% growth rate in 2016. This, in part, reflects the larger space sizes. But it also reflects a maturing market and the challenges associated with rapid growth as an industry gets bigger.
Member growth also slows over the forecast period, but is still growing at a very brisk 26% pace in 2020.
So is this forecast reasonable?
In terms of share of the market, coworking will still be small to tiny in 2020 depending on your market definition.
In the U.S. alone we estimate that about 22 million people could be coworking space members. The global number is much, much bigger. So 3.8 million global members is still likely less than a 4% penetration rate.
In terms of other metrics, the real estate firm JLL points out that coworking spaces only comprise "0.7 percent of the total U.S. office market" and less than that outside of the U.S. This forecast would move this to a bit less than 2% of the U.S. office market in 2020.
Another interesting set of data is Starbucks had about 23,000 global stores at the start of 2016 and McDonald's had about 34,000. We think it's reasonable to believe coworking could be bigger than Starbucks. Interestingly enough, by 2020 some Starbucks stores might be considered coworking spaces.
So we feel pretty good about this forecast.
Having said that, our 2014 coworking forecast turned out to be way too low.
Our 2015 was also too low, but better than 2014.
Prior to 2014 our forecasts were low to on target. In the 8 years we've been doing coworking forecasts, we've yet to have one that turned out too optimistic.
But we've yet to see the coworking industry go through a recession - and one is likely over the next few years. A major recession could, of course, have a major impact on the industry - and potentially make this forecast too high.
One last point. How coworking is defined is an important attribute of any coworking industry analysis. See our 2010 article What's the Definition of a Coworking Facility in our old Coworking Labs Blog for our definition.
We'll have more on this forecast, including specific data on the U.S., in the coming weeks.