For most of the region’s office tenants, more options for smaller spaces

May 11, 2014

Over the past four years, the number of office tenants in the Washington region that lease less than 5,000 square feet has trended up, while the length of lease terms for all office tenants has become shorter. In 2013, 70 percent of all office leases signed in the region were for less than 5,000 square feet. Meanwhile, the average lease term for all office tenants has dropped 10 percent from its historical average, hovering slightly below 4.5 years for leases signed in 2013.

Previously, the only alternative for smaller companies was an executive suite: fully furnished offices with shared common areas and meeting spaces, paid on a monthly basis with no long-term obligations.

Recently, more services catering to small office tenants have emerged in the Washington region. Start-up companies in the District and certain major employment centers such as Tysons now offer numerous new co-working spaces that have set up shop throughout the region. Currently there are 10 co-working spaces in the District with more on the way.

Much like their executive suite predecessors, co-working spaces such as WeWork and UberOffices provide physical office-like space to those who would otherwise work from home or log in from a coffee shop. For a monthly fee, these companies provide WiFi access, desk space, conference rooms and events, such as speaker sessions and networking.

Many co-working spaces serve as a type of business incubator, saying their tenants report increased productivity from being surrounded by other creative types. WeWork, which has a large presence in New York City, opened two locations in D.C. this year and is planning to open another center in Crystal City. The continued expansion of co-working space in the Washington area could help invigorate the local economy by supporting budding entrepreneurs planning to turn D.C. into a tech start-up hub.

Another co-working space provider, LiquidSpace, claims that desks in traditional offices sit unused about two-thirds of the time. In response, it developed a model of connecting owners of office space with prospective tenants interested in renting available workstations for very short periods of time, down to a day or even hourly.

Still another option for small office tenants is being offered by Vornado/Charles E. Smith, a major office landlord in Arlington and the District. Hoping to accelerate the leasing of space in one of its buildings at 251 18th St. in Crystal City, Vornado is partnering with six architecture firms in a competition called DesignLab to design and build ready-for-move-in work spaces that serve as a showcase for the “office of the future.” The plug-and-play suites range from 2,800 to 5,900 square feet.

The landscape appears to be changing with the addition of more options that range from the traditional office leasing model to a more accessible and flexible structure, especially for the smaller-sized tenants.

D.J. O’Brien is a research manager for the CoStar Group in the District.

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LITTLE IS GETTING LARGER

Although big deals get all the attention, the vast majority of office leases are signed by small businesses. In 2013, 70 percent of all office leases signed in the Washington region were for less than 5,000 square feet.

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