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Boston’s coworking boom is now on pause

The slowdown in shorter-term office leasing followed WeWork’s scuttled IPO, but industry officials say the concept still has a bright future.

Boston Mayor Martin Walsh, left, spoke with Dave McLaughlin, general manager of WeWork's Atlantic region, at the ​US Conference of Mayors' Winter Meeting last week in Washington, D.C.
Boston Mayor Martin Walsh, left, spoke with Dave McLaughlin, general manager of WeWork's Atlantic region, at the ​US Conference of Mayors' Winter Meeting last week in Washington, D.C.Patrick Semansky/Associated Press

Just like that, Boston’s coworking boom has hit the brakes.

In the five months since industry giant WeWork nearly imploded on the edge of a $20 billion-dollar stock offering, an industry that was rapidly transforming Boston’s commercial real estate scene has all but stopped in its tracks.

After an explosion of growth in 2018 and the first half of 2019, coworking and flexible-office companies since last fall have announced just a few small new outposts in Greater Boston — such as a new Workbar in Needham. Deep-pocketed upstarts, like Knotel and Industrious, which arrived in Boston with big plans, have slowed their expansions to a trickle.


WeWork itself — the big-name coworking provider that, practically overnight, became Boston’s single biggest renter of office space — hasn’t announced a new location here since the summer, a stark contrast with this time last year when it was launching roughly one a month. Indeed, people familiar with the deals say, leases for at least four new WeWorks fell through last fall — including a full building at 95 Berkeley St. in the South End, and the 140,000-square-foot top floor of the CambridgeSide mall. And these days there’s little talk of new ones opening.

“It all just sort of stopped,” said Liz Berthelette, research director at real estate firm Newmark Knight Frank. “In our meetings, no one talks about WeWork anymore. No one even really brings up coworking.”

For building owners that lease space to coworking companies — and tenants large and small that lease from them — the question now becomes whether the slowdown is merely a pause in the upward march of a new industry, or something more permanent.

The industry’s advocates, and they are many, say coworking will only grow.

What began as a way to offer for startups and “solopreneurs” to rent space without being locked into a traditional long-term lease has grown more popular with blue-chip companies that would rather not commit to leasing large amounts of office space for 10 to 15 years. Instead, they can take what they need for a year or two at a time, and leave office-management headaches to someone else. Globally, WeWork says, 43 percent of its members are larger “enterprise” companies, a list that in Boston includes Amazon, Liberty Mutual, and Puma.


Last fall — after WeWork’s sudden pullback — brokerage firm Cushman & Wakefield surveyed big companies and found that two-thirds put at least some of their employees in a coworking space, and that “many” expect to use more of it in the future. And major operators say their fundamental business remains strong.

“The demand side of the business is amazing,” said Dave McLaughlin, WeWork’s Boston-based general manager for the Northeast. “Occupancy has stayed very high.”

But the company grew so fast, in so many directions, that it still lost $1.25 billion in three months last year. Numbers like that cratered its public offering, led to thousands of layoffs and the ousting of founder and CEO Adam Neumann. It also cast a shadow on an industry that, to many, WeWork had come to define.

But WeWork is still around — about 13,000 people work at its 16 offices in Boston and Cambridge — and aims to emerge from its crash smarter and more focused, McLaughlin said. The company has a deep roster of tenants in prime real estate in desirable cities all over the world, he said, and plans to make the most of it.


“We’re not going to grow at the same hypergrowth rate we were before,” said McLaughlin, who expects WeWork to resume growing in Boston later this year. “We’re going to concentrate more in our key markets. Boston is one of them.”

Other operators say they’re eyeing Boston, too, but so far the results have been mixed. WeWork rivals Industrious and The Yard have both opened locations here, but none in recent months. Knotel, which focuses on larger leases with bigger companies, last fall announced the opening of an office near North Station, calling it the first of “many more buildings” planned for here. It has not yet signed a second lease. A Knotel spokesman said Tuesday that Boston “continues to be a key market.”

A few smaller coworking spaces have closed, most recently Coalition Space, in Chinatown, which shuttered last month. Spencer Rothschild, CEO of the New York-based company, said the sixth-floor office struggled after its building’s elevator was shut down for months for repair. Despite the setback, he remains bullish on Boston, and the coworking business.

“It’s only going to grow,” said Rothschild, who added that Coalition is scouting for new space in Boston. “It’s maybe 6 percent of [total office leasing] now. We think in a decade it’ll be 15 to 30 percent.”

But what form that takes remains to be seen.


WeWork and other major companies in the field, backed by venture capital funding, grew fast by piling into a small patches of prime real estate in various cities. WeWork, for instance, has 15 Boston locations within a roughly 15 minute walk of Downtown Crossing. It pays top dollar for space and competes with major landlords to secure the same types of tenants. Other coworking operators are taking a broader approach.

Workbar, which launched in Boston a decade ago, has built a network of smaller sites in Boston an its suburbs. It sees opportunity in places such as Norwood and Burlington, where startups and solo workers also need a place to work, but have fewer flexible options, said CEO Sarah Travers. That just-announced location in Needham will open in April and is already 20 percent pre-leased, she said. The company is planning more offices along Route 128 for later this year.

“There’s really such a need for this kind of space in the suburban market,” Travers said. “There’s a lot of growth in this industry. I think we’re just at the tip of it.”

Tim Logan can be reached at timothy.logan@globe.com. Follow him on Twitter at @bytimlogan.