The "workplace" has traditionally been defined as a physical location where employees of the same company come together to achieve shared business objectives. Larger corporations build complexes in urban office towers or sprawling suburban campuses, while midsize companies set up shop in multi-tenant buildings where the space suits their needs but offers limited flexibility for future business growth. Small companies and start-ups are often priced out of the market, creating the celebrated garage success stories of Dell and Apple.
In the last decade, a number of macro and micro trends have converged. From a technology perspective, the increased presence of laptops, widespread availability of broadband Internet and Wi-Fi, remote file access, increased importance and efficiency of email, and proliferation of smart phones allowed workers to be as productive in the office as in their home, at a coffee shop, or on the road. From a human experience perspective, the rise of freelancers and starts-ups, a shift toward self-employment, and the remarkable impact of the Millennial generation has caused the very complexion of the global workforce to change.
OLD CONCEPT, NEW APPEAL
While coworking models have been around since the mid-2000s, the flood of spaces to hit markets around the globe in the past few years has shifted the concept from a niche offering to a truly disruptive workplace alternative.
The coworking movement espouses five core values: community, openness, collaboration, sustainability, and accessibility. As a business model, it has a few constant characteristics:
- Space on a shared floor that can range from unassigned access to a single desk to a multi-desk private office
- Flexible terms allowing renters to move in and out and upgrade or downgrade with short notice periods
- 24/7 access to the site
- Shared office supplies and resources (printers, conference rooms, kitchen)
Additional benefits can include community building programs and events, digital access to a member network, industry-specific mentorship or resources, physical maker tools, and access to a global network of sites.
The rapid expansion of coworking locations across the globe is remarkable. From 1,000 worldwide space in 2011 to 6,000 in 2014 to a projected 37,000 in 2018 (Deskmag). As evidenced by Figure 1, coworking is no longer concentrated just in Europe and the US, but rather has gained significant traction in large metropolitan cities across the globe. The number of people working in coworking spaces has grown from 295,000 in 2014 to a forecasted 2,370,000 professionals in 2018 (Deskmag).
There are a handful of major players who control a majority stake in the market, but with increasingly low barriers to entry, the number of independent operators continues to mushroom. According to a recent survey, four out of five members plan to stay at their current coworking location for the next year and 15% of members work out of multiple coworking spaces.
As with any new operating model that takes hold of a deeply entrenched industry and gives it a good shake, secondary infrastructure has popped up to support both operators and members.
- Open Coworking is a nonprofit organization founded in 2012 that creates and shares decentralized, open-source resources for the betterment of the coworking movement. These include a wiki page with a directory of spaces, a Google group with 6,000 members, a leadership Slack channel, and blog that serves as a compendium for successes and learnings.
- Coworking Visa is a means to expand the network of the many independent operators beyond their local community by offering access to a membership program that invites members of any one space to make use of any of the other spaces in the network, usually up to three times, free of charge.
- Coworker is a ratings and reviews platform that contains user-generated feedback for more than 2,000 coworking spaces across 700 cities throughout the globe.
- LiquidSpace and Nomad are apps that help members find and book a desk, private office or meeting room with little or no advance notice, leveraging existing empty real estate.
A FIT FOR EVERY SIZE AND SHAPE
There are many approaches to the coworking model, depending largely on the demographic segment and geographic nuances. A targeted approach can create a stronger sense of community and sticky client base, while on the opposite end of the spectrum, a diversified renter base can hedge against a downturn in any one segment.
The following three seem to be the most pervasive, attracting a mixture of startups, small businesses, established corporations and sole proprietors:
The most popular of the three classic models, stimulating attracts young startups and freelancers looking to grow their networks in a hip, urban environment. The aesthetic is distinctly cool, with bright colors, interesting textures, loud environmental graphics, and high energy messaging. The shared common spaces have a residential feel, with locally sourced or health-conscious food and drink offerings. A digital platform connects a global community and curated events build camaraderie.
Pragmatic, on the other hand, appeals to a much more diverse set of individuals. A private office for an energy sector retiree turned consultant may be located next to a real estate agent. Located in both urban and suburban locations, there are a mix of private and public zones, as well as shared and owned spaces. The aesthetic is more broadly appealing, with plenty of ergonomic furniture, though different locations may bring in some localized flavor through graphics and branding.
The most focused of the three is supportive, which really is an evolution of the traditional incubator. There is typically a competitive application process to gain entry, and membership includes significant mentorship, funding, and resource opportunities. The community and alumni networks are incredibly important in these environments, and usually manifest in regular programming such as lectures or meetups. The aesthetic is much more bare bones, with exposed cabling and wheeled furniture, reflecting the specific industry of focus.
However, many coworking founders have creatively started to target niche communities:
- Wellness with sleek modernist design and yoga studios, as well as certification from the WELL Building Standard
- Event management with unique industrial and education resources, including CNC routers, carpentry departments, yards of fabric, and workspaces to arrange flowers
- Bitcoin and blockchain with coop operating principles and the dApp Boardroom as a governance method
- High-end design with legendary designer architecture and furnishings, as well concierge amenities
In the coming years, providers will continue to expand into multiple locations, both within their locale and across the nation, as well as into larger spaces, which will offer event-based revenue, larger individual client footprints, and more effective negotiations with building owners. As larger players look for additional locations and growth opportunities, consolidation via acquisition is bound to occur.
Joint ventures between landlords and operators will also rise, allowing increased agility in buying, developing, and repositioning buildings to focus on coworking space. Corporate partnerships have been slow to form, but provide an incredible opportunity for companies to create innovation programs and space initiatives by moving entire teams and functions into coworking spaces to collaborate with startups, or even bring coworking operators into their office building to manage unused floors.
As people grow more comfortable working away from the office, convenience will be increasingly valued. Revenue-generating coworking spaces will appear in hotel lobbies, airports, condo and apartment buildings, and senior living facilities. Entrepreneurs will continue to push the definition of workplace by looking to non-traditional real estate as sites for coworking spaces. High-end restaurants often sit empty during the day, and offer built in furniture and dining options, as well as the occasional private dining room that could double as a conference room. In an effort to retain clients and drive additional value, operators will experiment with new concierge services, group discounts to local retailers, hotels and airlines, and other ancillary offerings.
PDR has been leading the evolution of workplace design for 40 years, building workplaces where ideas collide, people are motivated, and communities thrive. The coworking model takes different forms in the corporate real estate world to meet the demands for non-traditional workspace. Whether owned and operated independently by a coworking organization or by a developer, coworking spaces are most successful when they are intentional about selecting the combination of attributes that will best suit a business now, and on into the future. PDR has decades of history developing shared spaces that deliver high performance work across the globe. Leverage our strategy and design expertise to develop your unique brand of coworking.
Selina is a workplace strategist and Duke MBA, passionate about integrating design thinking principles with business acumen and consumer insights. For clients across the globe, Selina creates and delivers innovative solutions to pressing challenges that are rooted in the needs of people. As a PDR Workplace Strategist, she consults directly with senior business leaders to understand the internal and external forces that shape their company, in order to build a metric-driven design solution that authentically reflects the firm’s identity and brand, enriches the client experience, promotes creativity and cross functional collaboration, and enables future growth. She has impacted clients across industries, including ExxonMobil, Nokia, NEC, BP, Dominion Resources, and UBC Media (now 7digital).