Thriving In Smaller Markets
The time is now to adapt your organizational culture! As the changing market wreaks havoc on traditional working environments, coworking champions have strategized the way to build upon best practices in the industry. We at Coworking Resources have collaborated with leading experts to provide you with a current market overview and forecast of how functioning shared workspaces, serviced offices, and coworking strategies are changing. This overview includes details about the trends set in 2020 and ways you can find opportunities in trying times.
If you don’t need much introduction to current market changes, feel free to skip to the second part of the article which highlights our predictions.
Prefer the Cliff Notes version? We’ve prepared a handy summary - you can find it here.
As a heads up - Coworking Resources is releasing our highly anticipated annual coworking growth study in June. It will show the predicted growth of the industry in 2020 (for reference, check out last year’s 2019 coworking growth study).
We’ll keep this post updated - and if you have any feedback, please stay in touch via: email@example.com.
We have talked to numerous coworking operators and experts and guess what? Coworking is here to thrive!
To provide some context about where the industry is headed, we’ve asked Jerome Chang, Founder of BLANKSPACES, an LA based coworking firm, to share his outlook of the industry. According to Chang, coworking arrangements constitute about two-three percent of the commercial office market today. Research firm JLL predicted that coworking will grow to 30 percent by 2030. Chang believes that the industry could accelerate this goal within 5 years, as many current tenants will not renew their expiring leases or downsize - hence there will be more demand for shared workspaces.
Jamie Russo, Founder of Everything Coworking and Executive Director of the Global Workspace Association, says that “the 30% market share of coworking was never going to be made up of highly serviced coworking spaces - that growth would be driven by landlords transitioning portions of their portfolios into more agile floor plans (plug and play, furnished suites) with more flexible lease terms (1-3 years instead of 5-10). That transition will likely be greatly accelerated by the pandemic.”
A vision for a potential coworking building approach can be seen in the chart below. Instead of just occupying a small space in a large building, buildings in general will be more flexible to lease and have a “coworking character” designed into it.
Coworking creates flexibility in real estate, adds services, and can generate profits to landlords by offering premium space to tenants. These benefits are why Chang sees the industry transitioning into a hospitality offering, where clients will appreciate the variety of services and premium add-ons. These can include amenity offerings, such as self-service kitchens and beverage stations, to branded in-store coffee shops, and restaurants. All of this culminates in the perception of the brand, the culture of the community and customers in it, hence elevating the coworking “vibe.”
Global occurrences in 2020 have created a huge opportunity for coworking to re-organize and newly orient itself as “next generation real estate” to capture market shares promoting a future upswing. We’ve covered some of the “next generation” types of coworking buildings in our “Smart Building Index”. To make this happen, coworking will have to step outside the comfort zone of servicing freelancers, small businesses, and startups, and support three new user segments (if they haven’t already). These include:
These new types of coworking tenants will change the demand for coworking as can be seen in the charts below.
Let’s have a look at the three new user groups in more detail:
Corporate members will primarily come to coworking environments to look for flexible leases. They prefer serviced offices with private access to amenities. Corporate coworking demand, provides an opportunity to partner with those companies to help build out the space in the ways that they need it — and give them access to the popular coworking on-demand community hub.
Russo indicates that corporate use of flexible office options will increase exponentially over the next year.
“We’ve been waiting for this tipping point to hit, and many think the pandemic will push the demand. The world-wide work-from-home experiment is changing everything. The corporate headquarters/campus will never fully go away - but employees around the world have now demonstrated that they can set up a home office and be productive.”
Working parents or freelancers looking to have a flexible work/home balance fall into the Super flex members category. These users will look for flexible memberships (hourly), based on demand and project needs. These tenants include virtual memberships such as online communities, mail services, and social gatherings.
Following Russo’s prediction, we anticipate seeing three employee behavior changes as well, which will have an impact on how companies organize their work in general:
Will landlords be “spooked” by coworking post-COVID-19? The increased demand for a shorter-term, more flexible, better serviced products will force them to find the right approach to their own unique portfolio.
Russo thinks on the landlord side “demand for flexible office space will outstrip supply as we transition back to work. Tenant demand will accelate landlord’s transition to create more flexible, shorter-term solutions in their portfolios.”
Institutional landlords will be best-positioned to vertically integrate and potentially develop their own serviced office or coworking brands. But the commercial real estate market is highly fragmented, made up of many small owners, who will not want the operational complexity of marketing, staffing, and managing monthly memberships.
Now may be the best time for coworking operators to approach their landlords - they might be more willing than ever to let you help them fill up their spaces. For pro-active landlords there are increased benefits to partnering with local communities and coworking serves as a model for this. Letting businesses expand from these communities into serviced offices present a huge opportunity for coworking services.
Operators and landlords are literally reconsidering everything right now — questioning their identity as operators. Jamie Russo summarizes some of the questions on their plate right now: “Who is the target market? What products and services are offered? How will they be priced? What will the messaging be? How will it be marketed? What opportunities can be leveraged in the new landscape? What partnerships are to be considered? How can they reduce risk? How can they serve the market with a financially sustainable model?” Any of these questions are opportunities for coworking to get involved.
Many industry players believe that as we transition back to the office, the supply of flexible offices will be lower than demand for the first time ever creating opportunities for those operators and landlords that are poised to serve the market.
The advent of new coworking user groups in concert with changed employee behaviors has motivated us to make some predictions for new coworking models in 2020 that might be closer to shared workspaces than before. Here they are:
In 2020 coworking and shared workspace providers will also ...
… have additional insights? Let’s keep the list of opportunities growing! Send us your predictions and we’ll add them to the list: firstname.lastname@example.org.
If you want to read more - we’ve recently published a COVID-19 guide for coworking and will update this section with more links.
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