Coworking Concepts Could Help Ease Baltimore's Office Market Struggles

It was roughly 15 years ago at a conference in New York when a presentation from the Toronto-based Center for Social Innovation convinced interior architect Kelly Ennis of coworking's power to revolutionize the workplace.

"This is going to change the world," Ennis recalled thinking.

Inspired by the concept, Ennis pitched her employer about embracing coworking, arguing it would be the next big thing in offices.   

"They laughed at me," Ennis said, and she quit that job six months later.

Now, as the founder of Baltimore-based The Verve Partnership, Ennis remains an evangelist for the coworking concept. She argues coworking remains vital in cities like Baltimore where the office market is struggling to retain value as more tenants work remotely and sign smaller leases.

Last year, Baltimore's office market recorded roughly 98K SF of negative net absorption, according to CBRE's latest market report. The report also found the vacancy rate across the metro area was 17.8%, up 2.5 percentage points from pre-pandemic levels. 

Rising interest rates and concerns about the ability of office buildings to find tenants also dramatically slowed investment sales in the sector. Researchers at Newmark found zero office sales of significant size in the final quarter of 2022, a time of year when a substantial number of deals typically close.   

At the same time, there is anecdotal evidence local coworking spaces are benefiting amid the local office market's struggle. Roughly a year ago, Cordish Cos. announced it was expanding its coworking brand and launching Spark Flex in the Pier IV office tower in downtown Baltimore, a space The Verve Partnership helped design.  

Other projects, like Byrnes & Associates' overhaul of 223 East Redwood St., have embraced features of coworking space. After buying the property in 2020, the developer rebranded the building as Redwood Exchange and turned the property's upper floors into multitenant offices with entertainment spaces and conference rooms. 

But Chris Bennett, a principal at MacKenzie Commercial Real Estate Services, said flagging office performance hasn't resulted in the office users he speaks to showing increased interest in coworking space. If anything, he said, fewer clients are asking about coworking spaces as an alternative.

Additionally, coworking space can be expensive, he said, compared to traditional office leases, when many of the amenities those spaces charge for are factored into the rent. Meanwhile, more office users are incorporating innovative elements of coworking spaces into conventional office buildings.

"The people we’re talking to now … they’re moving, they're downsizing and sort of doing their own coworking space," Bennett said.

Terri Harrington, founder of Harrington Commercial Real Estate, said tenant downsizing is opening up opportunities for coworking spaces in downtown Baltimore.

Historically the average office tenant in Baltimore has been in the 3K to 5K SF range, Harrington said, but recently there has been a lot of activity for smaller space requirements of roughly 1,500 SF or less.

Many office buildings in the Baltimore market, Harrington said, have spaces that make it cost-prohibitive to reshape them as coworking spaces. Yet the more extensive vacancies caused by downsizing, she said, still present an opportunity. 

"However, with full floor vacancies left behind from work-from-home downsizing, some landlords are considering coworking space on floors left behind from the days of extensive office build-outs, particularly those of law firms,” Harrington said.  

A recent survey conducted by CoworkingCafe counted 28 coworking spaces in Baltimore and listed Columbia, where researchers measured 12 coworking spaces, as the No. 11 suburb in the nation in terms of coworking density. That same study also found that Baltimore was one of the few places where suburban coworking spaces outnumbered city locations. 

However, Ennis, Harrington and Bennett questioned those figures' accuracy. Many of the spaces included on that list, Ennis said, don't count as proper coworking spaces. She said of the properties CoworkingCafe tallied in Columbia, only the franchise Venture X meets her criteria for being an actual coworking space. 

"Coworking is not just a cool space with a printer," she said. 

A bona fide coworking space, Ennis said, involves more than just a thoughtfully designed space. It includes programs to bolster networking among tenants. It also features a community manager who fosters an environment that helps tenants grow and spur broader economic development. 

Coworking, she said, isn't just about a particular space. It's a mindset that embraces progressive ways of examining how workplaces function. It's a concept that applies equally to emerging firms and Fortune 500 companies.  

If the largest employers in Baltimore ditched the beige-painted cubicle farm and embraced the coworking mindset by creating places where employees want to work, she said, it would answer the most challenging question facing the office market: How do you get workers back to the office? 

“You would get everyone back to the office in a heartbeat,” Ennis said.