How Corporations are Driving Demand for Coworking Space
Coworking has come a long way since the concept first appeared about ten years ago. No longer just a passing trend, coworking has transitioned into the mainstream, now established as an industry all its own that continues to disrupt both commercial real estate and society’s ideas about the way we work. One of the latest trends in this niche is the increasing interest of a nontraditional tenant: corporations.
What is a Coworking Space?
Architecture/Engineering firm HOK defines a coworking center as “a membership-based environment where the self-employed, or people with different employers, work in a casual, community atmosphere”. They are the logical next step in the evolution of telecommuting – from home offices to coffee shops to incubators – and another facet of the sharing economy. This type of space is also notably different from traditional cubicle-style offices, typically featuring a more communal layout and flexible work areas. Coworking spaces do, however, provide many of the same amenities as those traditional offices, including high-tech conference rooms, access to cutting-edge technology, quality office equipment, and a kitchen with curated snack and beverage options.
Over the last decade or so, coworking has expanded across the world, accounting for 16% of office space in the United States and 36% of office space globally. There are now approximately 35,000 workspaces worldwide, collectively worth over $26 billion.
Who Uses Coworking Spaces?
Traditionally, coworking spaces have been utilized by independent workers, freelancers, and start-ups. But a new development has emerged where corporations are becoming the latest coworking tenants, Otherwise known as “corpoworking” , this trend currently accounts for 14% of coworking offices. Some corporations use coworking spaces to house entire departments while others use them for innovation teams or temporary projects. Coworking offices are also commonly being used to provide a collaborative space for remote employees who are not located near a corporate office to interact in person.
Some unlikely coworking tenants include Dropbox, Delta Airlines, Heineken, Microsoft, General Electric, PepsiCo, Accenture, PwC, and Twitter.
Why are Corporations Choosing Coworking Spaces?
Corpoworking won’t mean the end of the traditional corporate office, but there are several reasons that large companies would consider becoming a tenant in a space such as WeWork or Serendipity Labs.
Test New Markets
Coworking spaces can be a key aspect of corporations’ expansion strategies, enabling a company to test a new location before making a long-term commitment or, if they are building a new office, to enter the market earlier than construction completion. Further, this type of arrangement can give companies access to markets that may have a premium on space. Having this option enables companies to quickly adapt to changing business priorities. Using coworking spaces is also cost-effective – they can be up to 25% cheaper than a traditional lease, and typically agreements span 30 days – 1 year, rather than 3-5 years for a commercial lease.
Drive Innovation and Productivity
Corporations can use coworking spaces to create “innovation labs” or incubators that embody that collaborative and creative nature of start-ups. With unique work areas designed specifically to encourage employee interaction and the exchanging of ideas, coworking offices tend to drive greater output, engagement, and productivity, thus increasing the speed to innovation.
Access Untapped Pools of Talent
It’s no secret that there is a competitive job market and ongoing war for talent. Until recently, companies had to attract potential employees to the location of their office, which could be across the city or across the country. With access to coworking space, corporations can now go to where prospective workers are located and tap into new pools of talent without having to build out new office space. This flexibility enables companies to better attract and retain employees.
Facilitate Employee Engagement
According to Forbes, flexibility is one of the top three culture attributes team members value the most, but that does not mean that they want to be completely disconnected from their coworkers. In fact, 40% of remote employees feel that there is a lack of collaboration opportunities. For years, employees had to rely on coffee shop meet-ups or the like to meet face-to-face with their corporate peers; while these locations were adequate on occasion, they were not an ongoing solution. Having access to coworking space promotes connection, communication, and collaboration, effectively reducing absenteeism by 30% and increasing engagement by 70%. As HOK says, “Because people cost far more than office space, make sure your choice of spaces maximizes their productivity, engagement, and satisfaction.”
What Does Increased Demand for Coworking Spaces Mean for CRE?
While this trend holds only a small share of the office space industry and does not seem like it would be that impactful, corpoworking has several implications for the market. First of all, property owners of office spaces may need to consider new lease terms, amenities, and layouts that will accommodate the needs and expectations of the corporate tenant. These pressures are even being felt with more traditional office leases, with increasing demand for shorter leases and more amenities.
With regards to the building themselves, coworking offices are a way to leverage adaptive reuse to update older properties or to increase the functionality of underutilized facilities. They also provide an outlet for hard-to-lease spaces – in fact, 55% of coworking facilities were vacant for 6 months or longer before they moved in. However, one key consideration is that coworking spaces can have a people density that is three or four times that of a traditional office, putting extra strain on building infrastructure such as elevators, plumbing, and HVAC.
The CRE market is always evolving, and forward-looking commercial real estate professionals understand the importance of being adaptable to new shifts and trends. Coworking spaces provide corporations with the flexibility that employees demand and the access to talent and innovation that companies need. For CRE professionals, corpoworking is a new niche that has seen demand increase 21% in 2018, with business forecasts projecting continued growth to reach 30% by 2030.