It seems like every other day a new co-working space opens in the Twin Cities.
On Sept. 20, Novel Coworking held its grand opening to show off how it transformed the former Art Institutes building in downtown Minneapolis into its new Minnesota co-working outpost. The Reserve, a local suburban co-working operator, launched its newest office in a former furniture showroom in Roseville. By the end of the year, WeWork will open its shared office space in the new MoZaic East building in Uptown.
“I don’t think [co-working offices] are going away. … I wouldn’t even think it’s a trend. It’s an evolution,” said Ann Rinde, a broker for commercial real estate company CBRE who helps represent landlords for several buildings with co-working space including MoZaic East, Capella Tower and the AT&T Tower.
Shared, short-term office space currently represents only about 1.2 percent of the Twin Cities multitenant office market or more than 900,000 square feet of space, according to Cushman & Wakefield. But that’s an increase from a year ago when co-working made up about 0.9 percent of the market or more than 636,000 square feet of space.
Although growing, co-working is not as widespread in the Twin Cities compared to other major metro areas. In the Midwest, Minneapolis ranks behind cities such as St. Louis, Columbus, Indianapolis, Kansas City and Chicago in terms of how much co-working makes up the overall office market, according to CBRE.
While co-working is not a new concept in the Twin Cities, in the last two years, the co-working race has sped up in intensity and competition.
Novel Coworking, unlike many other co-working companies, owns its buildings. The Chicago-based company says its structure means it doesn’t have to charge as much for the space and estimates its monthly rates are 30 to 50 percent lower than competitors.
“We are excited to support Minneapolis’ entrepreneurial community with beautiful, affordable space to grow their businesses,” said Bill Bennett, founder of Novel Coworking, formerly Level Office, in a statement.
Spaces, a co-working provider that originated in Amsterdam, opened this summer in the North Loop complete with bikes that members can use to pedal to nearby spots.
WeWork, a New York-based co-working company, opened its first Twin Cities location in Capella Tower a year ago and it has quickly become a market leader (behind co-working provider Regus) with more than 17 percent of the co-working space in the Twin Cities.
WeWork recently announced it would expand its lease at the close-to-finished MoZaic East office building in Uptown from 46,000 square feet to more than 102,000 square feet, a little more than half of the total office space.
“In terms of the co-working market in Minneapolis, it’s pretty mature. … I think we are just scratching the surface,” said Megan Dodds, WeWork’s general manager for the Midwest.
Reportedly, a Silicon Valley-based company has considered space at WeWork for more than 200 employees to open a new location in the Twin Cities, but WeWork wouldn’t confirm. WeWork has seen “a really amazing interest” from “enterprise” or corporate users, Dodds said.
At its new Uptown location, slated to open in early December, the co-working company will offer its new WeWork Office Suites, private offices for teams of 20 employees or more.
WeWork plans to expand more in the Twin Cities, though Dodds wouldn’t give details.
For MoZaic East, one of a few speculative office projects in the Twin Cities that began construction without a tenant commitment, the WeWork lease was another testament to the positive impact co-working has had on the office market.
“I just think it’s a fascinating industry,” said Cushman & Wakefield broker Tom Tracy. “It’s been a very positive thing for absorption and leasing in the Twin Cities. I just think it will continue.”
In July, Tracy visited New York City to tour several co-working spaces with client United Properties, which owns the Ford Center, the Loose-Wiles building and the Nordic, currently under construction.
“Just the range and type of tenants was so professional, it really opened our eyes to it,” Tracy said, about the visit.
Several sources have indicated another co-working space will soon be announced in the North Loop though there hasn’t been an official confirmation.
The co-working expansion has extended beyond the downtown core. The Reserve just opened a Roseville office, which is the company’s third location.
“Convenience is one of the key mantras of our brands,” said Mary Bartlett, the Reserve’s chief operating officer. “We always say we’re two turns off the freeway. It’s real easy. People can see us. They can get to us. … It isn’t like we are the fifth tower in some office park or parking is complicated like you have the challenges in downtown.”
As co-working has continued to grow in the Twin Cities, types of spaces have evolved too. Within the last year, more niche shared office spaces have opened. The Coven and ModernWell, co-working spaces which are targeted mostly to women, opened earlier this year. The Finnovation Lab and Impact Hub MSP opened collaboration space for “socially conscious startups and entrepreneurs” in May as part of the Finnegans House development.
With acceptance of shared office spaces and short-term leasing growing in the Twin Cities, some building owners have experimented with offering flexible spaces themselves. Earlier in the summer, the 428 in St. Paul opened with one tenant: its own Wellworth co-working space on the top level. Landlords are also providing fully furnished spec suites for short-term lease such as at the AT&T Tower.
With all the new shared offices entering the Twin Cities has co-working started to oversaturate the market?
Assemble, which had been in the 15 Building in downtown Minneapolis since 2016, closed abruptly this summer, but the closure could have been due to internal factors as opposed to the market since the Chicago-based company shortly after was sold to co-working provider Industrious.
“Industrious has doubled its presence in Minneapolis in the past year, and is hoping to double its presence again in the coming years,” said Jamie Hodari, chief executive and co-founder of Industrious, in a statement.
With more office space being taken up by co-working, some question whether short-term spaces could be more vulnerable during an economic downturn and ultimately hurt the office market.
“I think a lot of landlords see it as beneficial to have co-working as a part of their projects,” Rinde said. “If we do see a downturn, as a landlord you want to have a variety of solutions for people.”
In addition, more buildings will likely continue a trend seen in co-working spaces to have community managers facilitate programming in common areas, she said.