The Evolving Picture of Coworking Space
Once heralded as the undeniable future of business office space and a realistic direction for commercial real estate, the picture of coworking space available and planned for 2020 looks somewhat different from the projections of 2017. Here's a review of what was, what is and what might be coming. The concept of coworking space was introduced in 2005, and it enjoyed a period of rapid growth a decade later. But today, although signals are mixed, the trend seems to be slowing.
Flexible office trends were innovative when first introduced, but by 2018, they were viewed as a "here-to-stay" portion of the office market. At that time, Bethany Schneider, Newmark Knight Frank associate director, wrote in a report that executive office suites constitute a major share of commercial real estate demand, and that coworking constituted about a third of Manhattan leases between 2016 and 2018. A JLL Survey at the time stated that 60% of corporate office space was underutilized, making coworking space sensible for a greater number of users.
Worldwide, the trend today has evolved to a position, according to some who have monitored the phenomenon, where quality supercedes the quest for quantity. Coworking is still an innovative response to evolving business changes fostered by technology. Coworking spaces can offer amenities and services that are invaluable for solopreneurs and shoestring startups. Coworking offices, conference rooms, business services, amenities, telecommunication and secretarial options can create an illusion of "big company" to amplify public acceptance. Coworking spaces can also provide human contact and interaction as a springboard for new ideas.
In 2017, a Global Coworking Survey estimated that more than 1.1 million individuals went to work at 13,800 coworking spaces across the globe. At that time, the expectation was that the market would grow substantially by 2020. Specifically, three directions were noted:
- That the market for coworking spaces would extend into Middle America, where lower costs could be reasonably expected to boost the appeal of paying to rent shared desks and services rather than working from home;
- That industry-specific needs, particularly for IoT technology and facilities targeted to other startup specialties, would become a priority;
- And, that research pointing to the "melting pot" benefits of coworking spaces would continue to attract users eager to share creative concepts and tap into a wide pool of ideas.
In the world of coworking business, names like WeWork, Greendesk and Impact Hub were originally considered luxury brands. They catered to targeted markets and focused on fulfilling a need for startups, entrepreneurial ventures and technology companies. The idea was that shared desks and conference rooms would bring people together in creative ways, eliminating the need for dedicated "brick and mortar" offices and wasted physical space.
A year later, in 2019, the trends were viewed in a somewhat different manner. The underlying focus of coworking space, at least in the view of one coworking enthusiast, had shifted slightly from technology to community. Alberto Di Risio, acquisition marketing manager for Kisi, wrote that successful coworking businesses had demonstrated an important ability to cater to niche industries, and that industry-specific needs were more important than prime real estate or a complete roster of available services. While he viewed technology as a vital part of the co-working model, Di Risio believed that software solutions and advanced technologies should remain flexible and adaptable.
To carry that a step further, other analysts pointed to a developing interest in targeted spaces: coworking offices for women only, or rural coworking, spaces for parents only that might include childcare facilities, and coworking spaces for specific businesses that would benefit from enhanced networking opportunities.
2020 and Beyond
Even as the past couple of years have brought many changes to the commercial real estate market, most analysts seem to agree that flexible office space is a concept that is here to stay. From among the scenarios that were envisioned a couple of years ago, moderate projects for growth seem the most viable. The truth is that changes and adjustments in the market are always based on outside influences: the economy, new technology, global trends, and political uncertainty.
The trends that seem to be dominant in early 2020, however, also conform to previous expectations in important ways:
New Directions in Shared Space
With the current growth of urban farms and farmers markets, a corresponding growth of commercial kitchens and cooperative distribution networks is a growing trend in major metropolitan areas like the Dallas-Fort Worth Metroplex.
Although not flexible work spaces in the traditional sense of desks and conference rooms, fully equipped and licensed kitchens serve the needs of small bakers, producers of artisanal jams, jellies, salsas and sauces, and even food stylists and cookbook authors with a need to test recipes. Some also have tasting rooms and demonstration kitchens.
A second new development in the culinary market stems from the needs of small-volume producers of specialty food products. Shared distribution capabilities simplify marketing and delivery of products like artisanal lettuce and salad greens, mushrooms, local tomatoes, edible flowers and specialty bread to end users, usually local chefs and restaurants. It's not traditional, but the business model relies on shared technology and a central warehouse and delivery system that is designed to meed a specific need. In this case, it's the trending new generation of farm-to-market commerce.
Another new concept that holds promise represents a kind of back to the future reimagining of mentorship and interning. In some school districts, students enrolled in career and technical programs shadow professionals at their workplaces, whether an office or a welding shop. In some areas, unique facilities are being built to give students off-campus training in specific trades. In cooperation with local businesses and industries, the financial burden is shared and the result is a supply of interested new job applicants for the future. It's an exciting use of shared space, knowledge and resources.
Hybrid Coworking Spaces
Similar but different, hybrid spaces can serve one need during part of the day and transform to meet other needs for a specific portion of time. The possibilities are endless. Just think about it: from a professional recording studio to an after-hours small-audience performance venue, to a professional kitchen to a pop-up gourmet dining experience, to a high-tech conference room or a technology-training classroom.
Even if the growth rate continues to slow, it seems certain that the future of coworking spaces remains bright for commercial real estate. It will undoubtedly be different, but it should be better than it was ever imagined.