Thriving In Smaller Markets
For the first time in recent years, the estimated growth of new coworking spaces is expected to be less than it was the previous year. However, even though overall growth has slowed, with 696 spaces opening in the US and 1,688 worldwide, it is clear that the industry is still flourishing.. This may be a reflection of the fact that a large percentage of coworking spaces are focusing on expanding their existing brands, while the majority of the industry is shifting focus to increasing occupancy rate and profitability of existing spaces.
According to a comprehensive review of coworking trends, nearly 35% of the businesses that opened are an expansion or chain. The majority of the businesses opening are still firms, business owners, or entrepreneurs who are entering the market for the first time. These new spaces are fighting for a bit of the market share and are trying to establish a brand and niche for themselves. We’ve uncovered a few major reasons why the industry seems to be shifting away from the more straightfoward growth of last year.
According to a 2018 study by DeskMag, coworking spaces are getting bigger each year and serving more members. While this coworking trend is nothing new, the study did reveal that the average occupancy increased to 1.2 members per desk, meaning coworking spaces are trying to fit more people into the same amount of space, with a 25% rise of private offices beginning to take over event spaces or common areas. Coworking spaces are squeezing more value out of the existing desks available while trying to listen to what the consumers want.
When coworking spaces first became popular, people saw it is a great way to escape from the traditional office or their home office. Now, it has become so much more. Coworking spaces give their members the chance to interact with people from different companies and backgrounds.
The Wing is a prime example of this. The coworking company has spent money on building a high-quality brand that allows its mostly female members to come together and network. Rather than focusing on attracting corporate clients, The Wing focuses on building a networking community for its members. They host regular networking events that attract women like Hilary Clinton to speak and empower the members. Because the company has spent time listening to the demands of the environment, The Wing was able to curate a high-quality community for its members.
One of the coworking trends the industry focuses on is the quality of the members over quantity. Incubate Ventures Inc., a coworking space that focuses on innovation, puts its members through a vetting process before they can become members. This unique system ensures that they are an excellent fit for the space, and helps to retain their members for longer stretches of time.
Acme Works, a Toronto-based coworking space, believes in a similar process of finding quality members. When the company first began, they offered deep discounts to two large teams, even though they knew they wouldn’t stay for a full year. They did this because Acme Works realized that people in the coworking space would attract more people. The coworking space wanted to find new members that weren’t just interested in a good deal or cheap rent; they were interested in joining a community and engaging with other members. Ultimately, the members are what makes a space unique, and the coworking spaces are trying to bring in the ones they think will elevate the community.
When a coworking space first opens up, the main source of revenue stems from membership fees and packages, as well as renting out equipment. However, coworking spaces have quickly realized that the market demand is wide-open for them and that by maximizing the profitability per square foot, the coworking space can increase its profits.
WeWork is a prime example of a company that has capitalized on increased profit potential and has expanded outside the standard revenue streams. It has recently acquired a variety of companies in different markets like coding, digital marketing, and architectural modeling software. While it might seem like these are unrelated industries, WeWork is focusing on meeting more of its member’s needs, and therefore ensuring that the members spend more money within WeWork’s growing ecosystem, similar to Google or Amazon, but for the sharing economy.
WeWork's business model may not be the industry standard
While growth in the industry might be slowing compared to years past, that doesn’t mean that coworking spaces are failing. They are simply evolving to fit the changing needs of the industry, redesigning office spaces, and tapping into new markets.
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