Rates of entrepreneurship in the US and Canada are among the highest in the developed…
Coworking is both a concept and philosophy. A simple definition covers the conceptual side – shared office space with other companies, teams, or individuals where virtually everything except a dedicated desk or office suite is shared. However, coworking is more than just sharing WiFi, a kitchen, and a conference room with another company; at its heart, it’s just as much about innovation, collaboration, and flexibility as a set of shared amenities.
We’re going to take a closer look at coworking space, covering a wide range of topics that include everything from its history and explosive growth to its mechanics and biggest names. With this comprehensive discussion of coworking, you’ll have a better understanding of where it comes from, where it’s heading, and how it might benefit your own organization.
Coworking Space Overview
Today’s coworking market can trace its roots back to a single collective coworking space in San Francisco’s Mission District in 2005. Originally open just two days per week, that first space sat vacant for over a month as even a progressive city like San Francisco was unfamiliar with the coworking concept. However, it didn’t take long for flexible office space to take hold and thrive, growing from 14 spaces in 2007 to over 18,000 across the world by 2018. Looking forward, the global coworking market is projected to surpass 26,000 spaces in 2020, boasting over 2 million members.
Recent growth in the United States mirrors those global coworking statistics, where total shared space in the 20 largest domestic markets grew from nearly 27 million sq ft in 2017 to over 43 million sq ft in 2018. In urban centers, coworking represented 2.2% of the total office space inventory by year’s end 2018, a 50% year-over-year rise.
Further, cities with a significant tech workforce tend to have a larger coworking presence. Not coincidentally, the Austin, Manhattan, Portland, Seattle, Denver, and Bay Area/SF markets – all with a substantial tech footprint – represent 70% of the largest coworking markets by percentage of total office space inventory.
These statistics jibe with the inherently innovative and collaborative nature of coworking space, making it especially attractive for tech and startup firms. However, coming years will see a broader range of industries embracing the coworking concept – along with the thriving gig economy – where operators are already catering to the needs of manufacturing, healthcare, financial services, and other unique sectors with specific CRE demands.
Is Coworking Worth It?
Statistics provide a helpful glimpse into the overall market, the average flexible office space, and where it might be heading in the future. However, to better understand the growing popularity of coworking and if it might fit your own organization, let’s look at some of coworking’s most common benefits.
- Community – There’s a sense of community in a shared workspace that traditional office space cannot match. Not only does a flex space foster a collaborative spirit, but it also provides unique networking opportunities to possibly expand your strategic alliances or customer base.
- Furnishings – Coworking spaces come fully furnished, a feature too often overlooked by companies. Simply moving furniture and equipment from one traditional space to another can require an immense amount of planning, time, and effort. Coworking space removes that variable from the equation.
- Amenities – Aside from perks that garner the most attention – locally brewed coffee, beer on tap, kitchen facilities, exercise equipment, amongst others – flex spaces also provide access to soundproof phone booths, conference rooms, and other amenities that can drive performance for your team.
- Fees – Depending on the length of your agreement and number of desks, coworking space can be significantly less expensive than traditional space, especially when you include the ancillary expenses associated with a conventional lease like moving costs, furniture, utilities, and maintenance.
- Flexibility – Perhaps the most obvious benefit of coworking space is the flexibility it provides your company. Upsuite defines coworking as offering leases of three years or shorter. Month-to-month options are available for the majority of spaces, making your office space agile enough to adapt to your changing needs. Therefore, if you plan on expanding your workforce or even selling your company in the near future, you’re not locked into a long-term lease.
Downsides to Coworking Space
Some of the benefits of flexible office space can also be drawbacks depending on the nature of your business. Naturally, understanding both the pros and cons is necessary to make a well-informed decision for your organization. That said, while the following factors are the most commonly referenced drawbacks, the wide variety of flex space found in today’s vast coworking market will almost always provide effective alternatives, even for the most specific of needs.
- Shared space – What sounds like a benefit to one company could very well be a detriment to another. Not every enterprise is a startup that thrives on collaboration. Therefore, a physician’s practice, for instance, with HIPAA concerns, wouldn’t necessarily want to share a space with other companies and put patient privacy at risk. To avoid such a dilemma, a private office or suite would resolve most, if not all, privacy issues.
- Distractions – A noisy, active environment is another possible drawback to using a coworking space. If your organization requires a more sedate atmosphere, perhaps for a sales team that’s always on the phones or for onsite client meetings, certain coworking spaces would likely be a poor fit. Of course, not all flex space is loud and distracting so if noise is a concern, choose a space that matches your organization’s vibe or temperament. A private office or suite would also address unwanted distractions.
- Lack of control – Many companies now prefer to take a highly curated approach to their corporate culture. Sharing a coworking space with other enterprises makes it difficult to adopt such a strategy, where the environment itself will wield a significant influence on your culture and employee experience. To enjoy the best of both worlds – the benefits of coworking but control over your corporate culture and work environment – many spaces offer custom buildouts or even the freedom to design your own space.
How Does Coworking Work?
A typical coworking agreement has far fewer moving parts than a traditional lease. In fact, simplicity is one of the most appealing aspects of a coworking space.
- Coworking spaces use agreements, not leases like traditional office space. Leases require a real estate license and are regulated, whereas coworking spaces essentially use service agreements.
- Agreements typically range from month-to-month to two years in duration, although they average in the six-month range. Smaller teams tend to favor month-to-month agreements due to the significant flexibility they provide.
- An organization pays membership fees to a coworking operator, not rent or lease payments. A single freelancer can find a fractional seat for $50/month in some markets, but fees can go as high as $1,000/month in New York. Obviously, the number of seats, market, and term length all impact the fees. On average, however, a floating desk for a single seat will cost between $50 – $350 in most markets, while a private office for a small team will range from $350 – $800 per month per person.
What Do Coworking Spaces Offer?
Aside from flexible terms, lower costs, and networking opportunities, many coworking spaces also provide a lengthy list of amenities that can help in everything from employee satisfaction and culture to productivity and recruiting. Although you’ll always want to check for specific amenities offered by a space under consideration, many of the most common amenities include:
- Shared Wifi
- Conference rooms
- Front-desk reception
- Meeting rooms
- Private, soundproof phone booths
- Workout facilities
- 24/7 building access
Types of Coworking & Flexible Office Spaces Available
Besides amenities, companies also have several types of coworking spaces to choose from, starting at a basic “floating” or shared desk for an individual, but also including:
- Dedicated desks
- Private offices
- Office suites
- Custom buildouts
Who Does Coworking Space Make Sense For?
Given its versatile nature, coworking space makes sense for budget-conscious teams with a flexible culture that can readily adapt to a shared work environment and community. Information technology, software developers, creative services, and professional firms all naturally gravitate towards the specific benefits that flex space provides.
Although coworking is most often associated with freelancers, bootstrapped enterprises, startups, and small businesses, the target market is rapidly expanding as organizations become more familiar with the concept.
Big Brands Using Coworking Space
We are now seeing several mid-market and even larger corporations using flex space as an alternative for remote workers who were previously working from home, where coworking provides a sense of community and teamwork that’s vital to a satisfying employee experience.
Although the list seems to grow by the day, some of the larger companies already using flexible office space include:
- Bank of America
How to Choose a Coworking Space
Ultimately, when choosing a coworking office space, it’s a matter of taking the different variables and factors into account to find space that suits your particular needs best. We suggest using a precise, organized approach that follows a series of steps to arrive at the best possible solution, a strategy we detail in our guide, How to Choose Coworking Office Space: Find the Right Location & Terms For Your Budget.
In our guide, we discuss everything you should take into account when searching for flex space for your team, how to conduct a Google search on your own, and how CRE brokers and specialized coworking advisors can play an important role in the process.
Whether you’re already looking for flexible space or still educating yourself on the market, there’s no sign of coworking’s growth slowing anytime soon. To that point, gone are the days where coworking could be described as a mere trend. Instead, flexible office space is a permanent fixture in the commercial real estate landscape that will only gain in importance and market share in coming years. As exciting and innovative as today’s coworking market is, we know the next chapter will only further transform what office space means to the modern enterprise.