Five Firms, Including WeWork, Awarded New Federal Coworking Contract

The federal government has paved the way for civil servants to work in coworking and flexible office spaces, awarding contracts to five flexible workspace companies.

The General Services Administration, which manages real estate and procurement for all federal agencies, has awarded Flexible Coworking Services contracts to WeWork, LiquidSpace, Deskpass, Expansive and The Yard.

"The contracts are part of a much longer process set in motion back during the Obama administration," LiquidSpace CEO Mark Gilbreath told Bisnow Thursday morning. "The federal government is rethinking how it uses office space, with the goals of economic efficiency, sustainability and a better worker experience."

The government anticipated a shift in office working patterns before the coronavirus pandemic — it posted the solicitation for flexible office providers in early 2020 before announcing the award last week. When the pandemic came, that kicked the movement away from traditional office use into higher focus, Gilbreath said.

"A myriad of companies across many industries have initiated or accelerated their move toward nontraditional office space," Gilbreath said. "The GSA should be applauded for setting this vision in motion pre-Covid. The agency was right before the pandemic made it obvious to everyone else."

The GSA is paying $50M across the five providers, 50% of which will go to four of the participants under the small business designation, Expansive CEO Bill Bennett wrote on LinkedIn.

"The pandemic has fundamentally changed how work is approached, and now government agencies will have a tool to help employees succeed while saving costs,” WeWork CEO Sandeep Mathrani said in a statement. “The workplace of the future requires flexibility."

In June, President Joe Biden's administration directed federal agencies to draft long-term policies for their workplace and remote work strategies, stressing maximum flexibility. Experts in government office leasing expect the government's long-term leased space to shrink by millions of square feet in the coming years, Bisnow reported last week.

"There are going to be a lot of instances where the government will either vacate buildings outright and consolidate into other locations or simply downsize as a function of the pandemic," Colliers Executive Vice President Kurt Stout, who leads the brokerage firm's Government Solutions group, told Bisnow. 

The five companies encompass a variety of spaces and leasing models. For example, WeWork subleases space to customers in various locations, mostly urban, Expansive owns its space (currently 39 locations), and LiquidSpace is a platform on which owners list their space and would-be tenants find it, thus potentially facilitating the leasing of any amount of space for any amount of time. 

Deskpass, which specializes in on-demand workspaces, stressed the efficiency of its pricing model for the GSA. The agency will only pay for the desks, meeting rooms, and private offices it needs and only on the days it needs them, according to the company.

The GSA manages more than 7,800 federal office leases totaling more than 181M SF in markets across the country, overseeing space for about 2 million workers, so giving even a small fraction of its space to coworking "represents a huge opportunity," Francesco De Camilli, Colliers International vice president and head of flexible workspace consulting, told Bisnow in 2020 after the government posted its solicitation.

"Their approach is to pick the best-in-market operators, not to establish a single point of contact with a national platform," De Camilli said. 

Emergency response teams that need to set up offices following a hurricane would be a candidate for flexible, short-term space, De Camili said, and other project-based initiatives would find such space equally useful. Some federal budgets are set for 12-month periods, so flexible space means that real estate contracts can follow the same short terms.  

"Working beyond the confines of traditional government offices has become more common," the GSA said in its request for proposals for flexible workspace in early 2020. "Government employees are now commonly equipped with technological tools to work from anywhere. The freedom provided by technological advancements allows agencies to efficiently and flexibly pursue mission success through the utilization of employee mobility and telework."