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04/17/2020

Shared Workspaces & Coworking in 2020

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: content@coworkingresources.org

Part 1 - Coworking Market Overview and Industry Changes

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 Building Vision 2020

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.” 

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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: 

  1. Corporate members
  2. Super-flex members
  3. Pro-active landlords

These new types of coworking tenants will change the demand for coworking as can be seen in the charts below.

Future coworking demand: (bottom left) Pre-crisis coworkings’ core audience include freelancers, small / medium businesses and startups. (right) Post-crisis this might bounce back but super-flex-, virtual-, event- and corporate members will take off pushing the market to extend. Slides here.

Let’s have a look at the three new user groups in more detail:

Corporate members

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.”

Super flex members 

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:

  1. The employee will feel “entitled” to be given latitude to choose where they work and when they work, much more so than before. It is now not just more convenient for people to work from home, but now employees will make a safety argument. 
  1. The employee can work from home, but may seek out a more flexible option that splits the difference between transitioning back to the office setting or working at home.  Those with spouses/ roommates, pets, feisty houseplants and small children at home, may seek out a balanced option that is nearby, that meets their perceived safety requirements.
  2. We have now proven that we can interact with our teams virtually. We have also all experienced first-hand how exhausting it is to be on Zoom all day long. After experiencing how 2-dimensional interactions across a screen don’t lend themselves as readily to the type of innovation and creative interactions that we can have in-person - this will change how employers value spaces. Employees will look for solutions that allow us to meet safely, in order to bring back those serendipitous walks to grab coffee that lead to break-throughs, less likely to happen while we sit in our home office with a three-year old climbing across our lap and the dog barking at the UPS guy.

Pro-active landlords

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.

Part 2 - Shared Workspace and Coworking Predictions for 2020

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:

Coworking Predictions 2020
10 predictions for shared workspaces and coworking. Slides here.

In 2020, coworking and shared workspace providers will….

  1. … start remote acquisition of new members including virtual walk-throughs for corporate companies, self-service signups for virtual memberships, and inside sales for super flex members.
  2. manage space for landlords as serviced offices. Successful coworking operators will see themselves as a community larger than their actual space and start partnering with buildings and neighborhoods in new ways.
  3. make events the main in-person experience. Since all members work different schedules, hours, and days during the week—and some might never work from the work space—events will be the main event to meet the community and gain significance.
  4. change the floor plan to include more five+ desk offices with private amenities—especially meeting rooms or phone booths.
  5. provide custom build-out services for corporate customers with specific requirements such as office security or internet bandwidth.
  6. collaborate with corporate workplace teams to manage IT, security, workplace technologies, and private amenities like snacks.
  7. provide super-flexible membership options from purely virtual memberships to hourly or day-based models to accommodate the future hybrid models of work-from-home for a couple of hours or days vs. work-from-office for a couple of hours or days.
  8. craft a virtual membership offering by partnering with and integrating the coworking CRM with some virtual communities limited to or beyond your members, such as networking communities like Lunchclub, coffee pairings, like Donut or community communications channels.
  9. ...utilize partnerships with well-known brands to better communicate levels of quality and preferences for their target audience— e.g., coffee from Blue Bottle coffee, conferencing systems from Cisco Meraki, or office chairs from Vitra.
  10. ...raise admission standards for their tenants in order to provide a homogenous/ standardized work community.

Bonus predictions from coworking experts

In 2020 coworking and shared workspace providers will also ...

  1. build stronger brands. “Serviced offices have clearly fulfilled a niche over the decades, but they have generally followed a traditional path to cater to executives, or who want an ‘executive’ vibe. Their brands, and therefore community influence, rarely captured the general public’s attention that coworking has seemed to capture. That said, “creative and collaborative” coworking spaces have seemed to fall into a misperceived rut of only catering to freelancers and start-ups, when in fact, they can serve well to corporate and other enterprise clients. We will continue to see more hybrids and variations in between both ends of the spectrum.” (by Jerome Chang)
  2. partner with brokers. Speaking with Jamie Russo, she is “already hearing from the brokerages and others that work with corporate clients that many real estate teams are planning for both a phased approach to returning back to the office as well as offering employees the option to work from third places that are both convenient and safe. We may finally see mass adoption of the “coworking budget” for SMBs and large companies.” (by Jamie Russo)
  3. change common area protocols. “Safety concerns will be paramount. Operators and landlords will need to demonstrate the highest level of cleaning standards. Adjustments to density will need to be made.”  (by Jamie Russo)

… have additional insights? Let’s keep the list of opportunities growing! Send us your predictions and we’ll add them to the list: content@coworkingresources.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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