Rise in Co-working Spaces May Make Next Recession Worse, Boston Fed Reports

By Ann Saphir

The rise in co-working spaces, like those offered by WeWork, may be a source of financial instability that could make the next U.S. recession worse by sparking a run on commercial real estate, Boston Federal Reserve Bank President Eric Rosengren said.

While commercial real estate valuations and lending standards have been a persistent worry for Rosengren, it is the first time he, or any Fed policymaker, has publicly focused specifically on risks from the rise of such flexible workspaces to the overall U.S. economy.

“I am concerned that commercial real estate losses will be larger in the next downturn because of this growing feature of the real estate market, which could ultimately make runs and vacancies more likely due to this new leasing model,” Rosengren said in a speech at a credit markets conference at New York University’s Stern School of Business. He did not mention WeWork or any other company by name.

Rosengren also explained why he dissented against the central bank’s decision earlier this week to lower borrowing costs for a second time this year.

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