Coworking Spaces In Luxury Apartments Offer Latest Test For Downtown Offices

Office landlords in Manhattan have a new competitor to watch out for: apartment developers in Brooklyn.

Multifamily rental properties have spent the last three years polishing their amenity offerings in the hopes of attracting higher-paying tenants. While some often end up being underutilized — like fitness centers, golf simulators and balconies — tenants’ demand for coworking space reached new heights during the pandemic. That demand isn’t going anywhere, especially for renters who live in Brooklyn, landlords say.

“You have to create a vibe if you want people to get off their couch and come back into the office,” Johnny Messina, WeWork’s portfolio director for Tri-State leasing, said at Bisnow’s Brooklyn State of the Market event Thursday at Rubenstein Partners' 25 Kent Ave.

“What’s funny about that is that you guys are trying to amenitize office spaces to get employers to bring workers back to office — as opposed to me,” Jorge Jorge, president at property management firm Lisa Management, said in response to Messina on stage. “I concentrate on multifamily rentals, and my team and I curate events to try and keep tenants in the buildings as long as possible.”

Spaces that were previously resident lounges in Lisa Management properties have been repurposed to entice more work being done in the building, Jorge said. 

“Before Covid, we were having parties. Now, during the day, they’re like coworking spaces where people are mingling,” he said. “From a residential perspective, I feel like there's so many mirroring of office spaces with very residential buildings.”

While those spaces aren’t as busy as they were during the height of the pandemic, Jorge said, they remain a draw for tenants in Brooklyn who are seeking a space outside their apartment but closer to home than their employers’ offices.

Offering workspaces as a residential amenity has boosted demand in Lisa Management apartments, Jorge said. There is currently no availability at the property manager’s House No. 94, a luxury building located at 94 North Third St. in Williamsburg with amenities including bike storage, a landscaped roof and an interior courtyard.

“During Covid, it was a no-fee building for residential purposes,” Jorge said. “Now, we’re able to actually shift that cost to the renter instead of having it on the landlord side.”

Coworking spaces have more prominently featured in Domain Cos.’ residential projects since the pandemic, said Madeleine Roy, the firm’s director of development.

“We have recently been really focused on the placemaking component,” she said. “That means curating the right retail, but we also have some other things — components to our platform that we are working on expanding, one of those is a coworking brand that we are looking at putting in some of the residential buildings.”

Brooklyn has a high concentration of mixed-use neighborhoods, blending residential spaces with busy retail corridors, experts said. Residential demand for luxury-based amenities, like building gyms with private club ambiances, is strong, which Brookfield Properties Vice President of Leasing Jesse Cooperman said portends future office demand.

Employees have less patience for commutes, which average between 40 and 60 minutes from Brooklyn into Manhattan, he said.

“Having office proximate to where people want to live and amenitizing that office, integrating it into the surrounding residential, will benefit office,” Cooperman said.

Demand for a full amenity suite is showing up in Brooklyn’s condo sales market as well as its rental housing market, Brown Harris Stevens Development Marketing President Stephen Kliegerman said.

“Buyers now realize that they're spending more time at home because they're working from home, at least part time if not full time, and jumping down to take a swim or go into the gym in the building [...] that’s something people are looking for,” he said. “I've also seen, because of rising rents, tenants willing to move to what they would have considered four years ago secondary locations for better buildings with better amenities.”

But developers’ focus on workspace amenities could prove yet another thorn in the side of the city’s office landlords, who will have to adapt, Cooperman said. 

“That poses a huge challenge for central business districts,” he said.

Downtown Brooklyn’s rezoning resulted in a large amount of residential development, turning it into a neighborhood with a diverse set of asset classes, Cooperman said, but that’s fairly unique at present. Brookfield owns a large portfolio of Downtown Brooklyn office buildings after its 2018 acquisition of Forest City.

“Other central business districts don’t, and they’re going to have to adapt,” he said.

Although coworking spaces in residential buildings may increase pressure on office landlords, formal office space will largely work in conjunction with informal spaces in residential buildings, Cooperman said.

“The way we see it is not necessarily in competition with the residential amenity space,” he said. “We just want to give tenants more opportunities to step outside the office and work collaboratively or independently from within the office envelope.”