One of the burning questions in the real estate sector for 2020 is, what does coworking look like in the future?
There has been a lot of speculation about the effect of the COVID-19 pandemic and about the changes to the way we work and live because of it. The crisis has accelerated the speed of change and the amount of attention this question has received but I would submit that the shift to the future proof office was already well under way when the pandemic rolled across the globe.
It has long been possible for people to work from anywhere they like; and it has been a matter of company culture and hidebound decision-making that this was for some time discouraged or thought of as an option for contractors, freelancers, and other non-vital stakeholders for many businesses.
But what does it mean to you as the operator of an independent coworking space?
The Rental Arbitrage Model
We need to look at our own culture, the culture of coworking, first when we look at this question. The dominant model for coworking in the period between the end of the Great Recession and the beginning of the pandemic has been rental arbitrage.
This means in essence, that one person rents a space long term, and then — by permission, licensing, or sublease — earns money by allowing other people to use that space, usually on a short term basis.
Rental arbitrage is a model which has quite a few problems and in the long term is not terribly resilient. A lot of coworking spaces were started during the Great Recession when rent in high-value locations was cheap due to lack of demand.
And then a funny thing happened:the activities of the coworking space resulted in a flourishing of the ecosystem around the coworking space, resulting in higher demand for office space in that area, then an increase in rent for the coworking space which resulted in their closing.
If the natural consequence of your business model is that your success drives you out of business, there is a problem. And that is one of the problems with rental arbitrage based models.
From the rental arbitrage model has come a number of other models: collaboration spaces, where the earnings are driven by the collaboration of the coworkers or collaborations of the coworkers with space; service-driven spaces, where the earnings are generated by the coworking space offering services to the coworkers in support of their business; coworking and childcare combination spaces, where the earning are driven by focusing on services other than business services to a specific target market (parents, mostly of young children) just to name a few.
But now our vision, sharpened by the lens of the global pandemic, is focused very strongly on this:what does coworking look like when gathering indoors turns deadly?
Coworking has for many come to mean rental arbitrage or — in the case of hot desking or events based coworking spaces — has come to rely on generating high occupancy rates to be sustainable as a business.
What does coworking look like when occupancy rates must be less than 50%, when extra cleaning and ventilation costs must be incurred, in order to keep our coworkers alive?
Coworking is a movement as well as a method of real estate management, and it has value for the economy, for the development of the small businesses and freelancers who are creating the future of work every day right now.
It also has value for the coworkers, in the development of friendships, professional relationships and development, and in maintaining human contact and generally helping people stay happier.
Many coworking spaces are looking at ways to increase their resilience in the rapidly changing world of work and one of the subjects that is coming up a lot is virtual coworking.
So what is virtual coworking?
As always in a rapidly innovating sector, everyone’s answer is slightly different. At the end of the day all of them are trying to focus on the question: what can a coworking space offer its coworkers, other than a desk and a chair?
Many spaces use webinar tools to bring people to a shared space experience. In that case, the space which is hosting that room can, for example, move you to a breakout room if you need a private room to chat to another coworker or you just want to invite someone to a meeting from outside without using your own slightly shaky connection.
Some are building a sense of community by hosting events throughout the day, making it easy to learn from other members whilst making coworking colleagues and friends. Some spaces also use Slack or other platforms to stay in touch.
Another approach is to serve as a home base for coworker’s business and support that with for example a basic membership which includes the right to register the business at your coworking space address, and offering the kind of services the coworkers need during the current business climate — shared shipping and postal accounts, shared calling and webinar services they might be unable to afford alone, shared marketing and advertising accounts and so on.
This kind of approach does require an adjustment in how we look at coworking: traditionally the only people who were considered interesting customers for a coworking space were those who needed or wanted office space on a regular basis.
This class of people is rapidly decreasing and is coming to include employees of large companies, who prefer not to brave public transportation or long commutes, and who are no longer required to do so and are looking for alternatives.
But there are also many businesses and teams which are distributed first, and this class of business is increasing in number. What they need is different from traditional businesses and so how they cowork will be also.
There are also many businesses in the trades, in transportation, in freelance and the arts, pop-up shops, in healthcare and home care — just to name a few — who want a home for their business, but who do not need or want a traditional office. Enter coworking.
So what do you need to think about for these coworkers?
High tech high touch is the motto for our Cowork Tools, and high tech high touch is the frame in which to look at developing this business.
These businesses are used to online, they do not find it off-putting or inferior to traditional business, and they have little patience for attitudes which relegate them and their thriving businesses to second class. They need and want a home base, a single place where they can get all their business needs handled easily and without friction.
These businesses want a place where their customers can go to get in touch with them, which is attractive and professional, and where their customers can get an answer while they themselves are working on location with another customer. They often need a place where they can store their — often extremely expensive — speciality tools and where they can do some prefabrication or store materials needed for a job. A warehouse space is excellent for these coworkers.
These businesses need a place where they can handle crises when they come up, where they can reliably come and work for short periods and rely on someone else to handle their post and visitors when they are away.
All these businesses and more, need an address where they can receive their mail, they need a person with some sense of who they are to handle that mail when they are not around, they need a place to meet when they meet which can accommodate hybrid meetings, and they need a place which is flexible enough to add services and support when they need it, or to put them in touch with someone — maybe another coworker — when that isn’t possible. A business concierge if you like.
Implementation and Future Proofing
To implement this the hardest part is the change in perspective, in how we look at these businesses and our relationship to them as coworkers.
After that it is a relatively simple matter of adjusting the contracts, making sure they are in accordance with local regulations and rules, setting a price for the additional services and improving our hospitality and customer service game to include both the online and offline world our coworkers inhabit.
One thing all these businesses share is that they need an address to receive mail and register their business, and they need a place to receive visitors — sometimes regularly and sometimes irregularly. And they need it to be their place, not someone else’s.
If you allow people to use your address, then you will need to comply with the AML/KYC regulations right across Europe and the UK.
Even if you do not, you will need to comply with GDPR in all your business processes — and trustworthiness and protection of your community is an important way to distinguish yourself in the market.