Coworking Is Here to Stay — But the Next Generation May Surprise You
April 29, 2022
Companies want to attract talent. Employees want more workplace amenities. Coworking may be the win-win everyone is looking for.
Operating a company in today’s constantly shifting business landscape is no easy feat, especially at a time when employees are quitting their jobs1 in record numbers. Competition for labor is fierce. The imperative for corporate leaders has become not only how to attract candidates, but how to retain talent. Then there’s the question of how to encourage employees to return to the physical office, which, occupied or not, is costly to hold and maintain while business plans are changing dramatically and quickly.
On the back end of the pandemic, coworking companies will evolve to meet this need by offering customized, “just-in-time” office spaces and employee experiences that businesses need to please an increasingly diverse, dispersed and demanding workforce. By offering flexibility to expand and contract the workplace, coworking offers short-term leasing options that are hard to come by in any other model.
At the same time, it offers “high touch” employee conveniences as part of a fully serviced office environment, positioning coworking operators to compete as the most cutting-edge and up-to-date marketplace alternative to the traditional office. This model and the worker productivity that results will benefit the top line; yet, the back office will see plenty of benefits as real estate capital expenditures are removed from the balance sheet.
Coworking also deftly sets up a workforce that wants the flexibility to work from anywhere. It appeals to employees interested in new hybrid workplace models, a shorter commute and a fresh approach to the workplace environment. In fact, the popularity of coworking is only expected to grow2. In just three short years — by 2025 — the global coworking market3 will reach roughly $13 billion in revenue at a compound annual growth rate (CAGR) of 12%.
From its humble beginnings to the ways in which it’s changing the business landscape today, here’s what you need to know about coworking as you consider adopting it.
COVID-19: Accelerating Coworking Adoption
When the COVID-19 pandemic hit, many offices were forced to shift to remote working environments. It’s a story everyone knows too well. However, COVID-19 also inspired many companies to consider coworking spaces as practical alternatives to the traditional workplace as they wrestled with understanding the future of work. This growing interest can be attributed to the fact that many coworking operators have now evolved beyond shared office space for start-ups and small businesses to become full-service outsourced providers of office space and services to large and mid-sized companies.
The scope of occupancy and related services coworking can provide are unlimited. There are coworking companies that simply offer up meeting spaces so that organizations can hold large conferences. In other instances, a coworking company will completely remodel a space for a business, provide office services — including IT, reception, concierge, housekeeping and mailroom services — and maintain it while under lease.
Here are three predictions as to where the coworking trend might be headed in the next five to seven years.
Coworking Will Foster New Ecosystems
The corporate HQs of companies on Wall St. and Madison Ave. have traditionally helped to brand a company and offer proximity to talent, clients and business partners. Coworking spaces can offer similar benefits, but on a smaller scale. They’ll also likely serve as the central hub for an ecosystem of “in house” third parties providing complementary services directly to companies and their talent, such as health and wellness and other conveniences.
Consider The Cordish Companies, a real estate development and entertainment operator. The company is expanding its coworking business4, Spark, with the goal of establishing coworking spaces in bustling entertainment districts where tenants can enjoy dining, shopping and more. Similarly, a company called Techartista5 houses both creative and nonprofit organizations, offering up coworking spaces around popular landmarks in the city of St. Louis. The Wing6, a New York-based coworking company, has catered mainly toward fostering networking among professional women and female entrepreneurs, offering supportive programming including speakers and other activities.
New and Surprising Players Will Enter the Space Offering a “Hospitality” Experience
Large real estate owners and investors will build coworking into their offerings. Over time, we expect the corporate occupancy strategy for large occupiers to be centered around a customized portfolio that includes long-term leases, mid- and short-term leases, and coworking space from a single preferred landlord. In fact, this is a trend already in process that we expect to see increase. It wouldn’t be surprising to see large owners acquire coworking operators and promote the expansion of the “real estate as a service” trend, incorporating customized services that are embedded in their tenants’ culture.
The trend is also drawing unexpected players. Saks Fifth Avenue , for instance, created its own brand of coworking spaces called SaksWorks7. These luxury spaces offer tenants all the familiar amenities that coworking spaces provide, with a high-fashion ambiance, built-in gym and hydroponic garden to boot. We also expect to see the expansion of specialty coworking providers and the convergence between social networking clubs and coworking.
Companies Will Find a Competitive Edge in Coworking
In the war for talent, coworking will become a valuable asset in a company’s arsenal. Imagine a company looking to start up a new division in another state or expand its access to qualified talent. Coworking would allow it to open the doors, promote a “best place to work” environment, test the talent pool and dip its toes in the water before diving head first.
Coworking has the potential to transform both the corporate workplace model and the real estate owner/investor model. While there is no one-size-fits-all approach, the concept of an adaptable, flexible workspace holds broad and unique possibilities for the business landscape.
1: Fortune, “The Great Resignation rages on as a record 4.5 million Americans quit,” Megan Leonhardt, January 4, 2022
2: Business Wire, “Coworking Space Global Market Report 2021: COVID-19 Growth and Change to 2030 – ResearchAndMarket.com,” June 4, 2022
3: Market consists of “revenues earned by entities that provide coworking workspaces on rent or lease.” Business Wire, “Coworking Space Global Market Report 2021: COVID-19 Growth and Change to 2030 – ResearchAndMarket.com,” June 4, 2022
4: The Daily Record, “Cordish bringing Spark Flex coworking space to Inner Harbor,” January 12, 2022
7: Vogue, “SaksWorks Imagines Everything You Can Do—Eat, Stretch, Work, and Work Out—From Your Favorite Department Store,” Steff Yotka, August 17, 2021
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