If you want to know what the what the price of fish will be like next week, talk to a fisherman. They stake everything on reading the small signals that affect their livelihood. If you want to understand what is happening to a property market, talk to the brokers. They see the changes in asking prices and terms long before the transactions are even put on the market.
Turns out, that is exactly what a number of organizations do. One of them is REBNY, the Real Estate Board of New York. They put out a quarterly broker’s confidence index that tracks the sentiment of their large membership base. The second quarter report came out yesterday and it showed a slight downtick in confidence from 5.78 in the first quarter (out of 10) to 5.53 last quarter.
Another poll that came out yesterday was from the commercial broker CRM Apto. They specifically wanted to know what the brokerage community thought the threat level is for co-working to their business models. When asked, “How concerned are you that tenants, over time, will opt for co-working space versus traditional lease or sub-lease space,” 63% said that they are ‘not concerned,’ 35% said that they are ‘somewhat concerned,’ and only 2% said that they were ‘very concerned.”
The REBNY index did show some of the repercussions of the rise of co-working spaces in the last few quarters. One broker was reported as saying, “[A] combination of the end of VC [venture capital] cycle, rising interest rates, and lack of political certainty are all negatively impacting the market. Moreover, the WeWork’s of the world have created a false supply/demand balance. Had those companies not existed, the market never would have seemed as strong.”
So, when looking at it in this way, it could actually be the flurry of spending from co-working companies that created the artificial uptick that we have seen over the last few quarters. Cushman & Wakefield just released their report saying that, despite doubts by many industry veterans, co-working would likely survive a downturn.
Since co-working is so new it will be an issue that gets debated for a long time to come. We will keep using the brokers who work on the front lines to find out what might lie beyond the horizon.