THE BLOG

The Office-Sharing Effect

03/10/2015 03:58 pm ET | Updated May 09, 2015

The static corporate real estate infrastructure has the capability to suffocate growing businesses. Last year, office rents in major markets skyrocketed to more than $62 per square foot in the Bay Area and more than $65 per square foot in Manhattan. Some properties are being leased at over $100 per square foot - with each employee taking up at 150 square feet, that's $15,000 per year for one employee. This incredible cost is a massive percentage of a company's bottom line and has the potential to make or break startups.

Fact: Office rents are the second-highest business expense after head count.

The average cost of a shared office space in Midtown Manhattan is around $3.65 per square foot - a savings of over 90 percent.

This year, we will continue to see how savings of that magnitude can have a profound impact on our economy, including: the revival of central business districts, the further decline of unemployment, and a marked change of the makeup of venture capitalist's portfolios.

The mass exodus that has been occurring in central business districts will reverse due to office sharing.
U.S. News reported that between 2000-2010, the share of jobs near city centers declined in 91 of the 100 largest U.S. metropolitan areas. The high cost of doing business in the city played a large part in that exodus.

Despite even higher rents today, the affordability and efficiency of office sharing allows businesses the option to move back from the suburbs to the heart of the city, fueling economic growth and reviving downtown districts.

Office sharing leads to even lower unemployment
With office sharing leading to savings in the tens of thousands, businesses of all sizes will be able to transfer precious funds from rents toward hiring a kick ass employee. Even businesses that are sharing their space will see less red due to the added income.

Investments increase
For startup entrepreneurs who haven't yet sold their business to YahooGoogleBook, every cent matters. Those looking for an influx of funds from an angel investor, Private Equity firm or an established VC need to show that they are spending their precious funds on things that will actually move the needle for the business. Rent isn't one of them. Investments will increase as companies will use those funds toward projects that really matter.

The complete ripple effect the sharing economy will have on us is still unknown. What we do know is that the business sector has grabbed onto office sharing because it is providing them success in this recovering economy.