The Coworking Industry
Coworking and the flexible workspace industry is experiencing a massive growth movement. There are approximately 700x as many coworking spaces today than in 2008, and the industry has averaged a 30% growth rate each year. Today, Coworking makes up over 1% of the entire global corporate real estate portfolio and over 50 million square ft in just the U.S. alone. For us at Coworks, we are obsessed with empowering space owners, operators, and members to succeed in the flexible workspace industry because we believe it is the future of the workplace. However, not everyone is up to speed on the huge shift happening before us. I talk to many investors, employees, etc. who still don’t know anything about the flexible workspace industry. So to understand the massive growth, let’s talk about why coworking is the future of work.
What is Coworking?
Before we dive into the why, let’s talk about what Coworking is. Defining coworking and flexible workspace is no small task, as no coworking space is exactly the same. Deskmag defines it as “Every workspace with flexible structures that is designed for and by people with atypical, new types of work – that is not exclusively for people from one certain company.” That’s a bit of a mouthful. Google defines it as “the use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas, and knowledge”. Neither definition truly encapsulates the essence of Coworking spaces, so, for the purpose of this article, we are going to define Coworking spaces as: A service-oriented workspace that provides shared resources, amenities, and office space to one or more companies (typically on a flexible lease) to help them grow, foster collaboration and community, and focus on their business. In short: it is “Space As A Service”. By allowing business owners to focus on their businesses and not the dirty work of managing a space, filling up coffee, and handling logistics, coworking spaces offer a compelling value proposition compared to traditional office space
One of the main reasons for the rise of the Coworking industry is the rise of the remote workforce. We live in a digital age. Thanks to powerful software like slack, hangouts, and more generalized cloud computing, we are no longer confined to a desk to get work done and collaborate with peers. The shared digital economy has created new opportunities to work without needing to be stuck in a cubicle. In a traditional corporate office, your desk was more than your assigned seat, it was your entire hub for data, software, and tools needed to effectively do your job. One could not simply “take their work home” when that required transporting a physical desktop computer. In today’s cloud-driven ecosystem, a simple laptop and internet connection allows you to “virtually” log in to the essential data and tools needed to get work done. This “cloud revolution” has led to a now estimated 50% of the U.S. workforce consisting of remote workers. If people aren’t working in their offices then where else can you get work done? Home? Don’t bet on it. Coffee shops? Good luck doing your investor pitch over the sound of the espresso maker. People want to be flexible but they also need a space that’s reliable and professional to get work done, i.e. coworking spaces.
Space As A Service
Alongside their work tools, consumers expect a level of service and convenience in the places they stay, where they eat, and how they travel (what companies like Uber, AirBnb, and Postmates provide.) Similar changes are also occurring in the way these consumers work. The new workforce is growing up with these modern, mobile conveniences. Consumers would much rather pay a subscription to an inclusive, convenient service that they can cancel when they choose than to lock into a long term, costly deal or to go out of their way. In the end, time is money, so if Uber and AirBnb save you both, who needs a car or a hotel anymore? Office space should be no different. Why can’t my rent include furniture, cleaning, wifi, and the basic essentials to run my business? Why find and pay for 6 or 7 services just to get your space to a workable condition? Coworking is truly space as a service. It combines hospitality, retail, and commercial office into a friendly, affordable (all things considered) package that allows you to move in and get working on day one. No more dealing with shady ISPs, making trips to buy coffee every 2 weeks, or dealing with costly building logistics. Coworking spaces handle all the heavy lifting and allow you to focus on the team.
Another interesting trend is the rise of the gig and contractor economy. In the U.S. the gig economy makes totals up to 16.5 million workers and over 59% of companies use gig workers to some degree. Apps like Uber, Lyft, and GrubHub make it easy for people with cars to instantly plug in and start making money with little to no friction. Whether as a side hustle, in between a gig, or a full-time job, it is increasingly easy to ditch the corporate 9-5 in favor of a more flexible setup. Millennials and Gen Zers who entered the workforce or grew up during the recession are also increasingly more likely to freelance to create their own sources of opportunity and income. Flexibility, independence, and happiness in the workforce are all motivating factors to enter the “Gig Economy”. Coworking spaces are ideal for this workforce. Through the traditional coworking model, an independent worker can purchase an affordable, month-to-month subscription and have access to workspace, meeting space, amenities, and mailboxes in an instant. Traveling to Spain next month? No worries, just cancel your membership. Need to pop in for a client meeting? Not a problem. Coworking provides an efficiency and professionalism that you can’t get at your house or local coffee shop.
Benefits for Owners
Outside of consumers, there are tons of benefits for the building owners as well. Instead of keeping 6 floors of your prime, downtown real-estate sitting vacant as you wait for your next big fish, you can work with a Coworking operator who can fill those floors with multiple companies while taking over the burden of your lease. The types of agreements vary, but, by working with a Coworking Space, you can mitigate your risks and minimize the cost of vacancy in between leases.
All in all, coworking offers a ton of benefits for business owners, freelancers, and employees. The instant culture, community, and amenities provided at a coworking space makes for a more enjoyable, collaborative employee environment than a traditional cubicle office setup. The diversification of companies also helps landlords mitigate risk while making profits. We believe coworking is the future of work and that the workplace has seen a cultural shift that is only just getting started. JLL predicts coworking to make up to 30% of all comerical real estate in the next decade. At Coworks we’re providing the tools to help managers and members thrive in and manage these spaces and we couldn’t be more excited about the future of space as a service.