As the 9-5 lifestyle is rapidly becoming a thing of the past as corporations become progressively decentralized and take advantage of workforce flexibility enabled by technology, the use of coworking spaces is in many ways restructuring the nature of the traditional office job.
Communal working spaces are no longer a fad for entrepreneurs, startups, or freelancers. In fact, major corporations are adopting the trend, recognizing the benefits for their employees and cost savings. In line with this trend, HSBC recently moved 300 of their employees to a WeWork coworking facility in Hong Kong while IBM leased an entire WeWork building in New York City for 600 of their employees. Microsoft has also jumped on the trend, purchasing memberships for 300 of its employees.
Adding on the benefits, coworking spaces provide a non-traditional office environment that fosters interaction and collaboration between members. Originally intended to provide freelancers or small businesses with a productive and creative workspace, businesses have found that the flexibility of shared work spaces reduces overhead costs, does not require long-term leasing, and enables expansion and growth.
To get a better feel for the kind of growth in this area, WeWork, one of the leading operators of coworking spaces, is currently valued at $20 billion after receiving a $300 million investment from Japanese investment firm SoftBank. Also, since 2010, the company has expanded from their two original locations in New York City in to operating 163 locations around the globe in 2017.
Waseem Malleye, a real estate asset management and investment executive, argues that the coworking trend is here to stay, and the commercial real estate sector has taken note.
Rapid growth has made space in high demand and coworking spaces inherently more profitable than traditional office space, generating an average of 2-3 times more revenue. With the industry now possessing an estimated market value of $5-10 billion, large asset holders and venture capital firms have begun to jump on the trend, propelling coworking from an entrepreneurial fad to a secure and profitable investment.
The impact, though, goes both ways.
Increased investment has not only enabled growth in the coworking sector but has also integrated some of the core values upheld by shared workspaces into the way the traditional office real estate sector operates.
Founder of Coworking Insights, Ryan Chatterton, argues that the coworking concept will not replace the traditional office real estate sector, but rather traditional office real estate investors will adopt the philosophies of coworking and integrate them within the way they market, manage, and design spaces for productivity. He states that the way we use commercial spaces will shift to adapt to the demand for flexible, creative, and collaborative work environments developed by coworking spaces.
Waseem Malleye points out that there is still opportunity for landlords to shift their business models away from long-term, single occupancy leases to get ahead of the trend and maximize their revenue potential.
“While the majority of coworking spaces are still managed by an operator leasing the space, a partnership-based model between owners and operators is emerging. Making this leap is a great way for property owners to transition into the coworking sector and remain competitive while protecting their assets,” Malleye says.
He commends the resilience of the communal workplace model for its capacity to withstand economic turmoil due to its reliance on individual memberships instead of a single corporate client. While this rapidly growing industry is shaking up the commercial real estate sector, the potential for ingenuity and collaboration is bringing a surge of creativity to a the real estate sector.
