The Rise and Rise of Co-working Spaces
And what it means for businesses and the real estate industry
The concept of co-working space is not new, but it has grown immensely in popularity in the past decade, thanks in large measure to an unlikely catalyst: Covid 19.
If Covid 19 brought home one lesson for businesses it has to be the cost of commercial real estate and how it can be avoided. Space—rented, leased or owned, has always been one of the biggest capital or operational expense for businesses. And there are attendant costs to consider too. Such as utilities, amenities, WI-Fi, maintenance, and the rest of it. In the wake of the pandemic, as businesses trimmed down their staff to the bare minimum they needed to stay in business, they also let go of a lot of the space that they just weren’t using. Instead, businesses opted to lease co-working space in managed and shared (to some extent) premises.
This move meant that businesses could wipe out a huge expense in one go. No longer did they need to worry about the underlying infrastructure that office premises needed to do business. Items like Wi-Fi, phone lines, utilities, etc. were now being handled by a professional third-party provider. Thanks to these advantages, there are now millions of square feet of co-working space, and that number looks set to rise, with the entry of players like WeWork establishing new premises across prime locations
Benefits of Co-Working Spaces
Co-working spaces provide a number of benefits to the tenants who use them. These include:
Cost savings
Co-working spaces allow you to rent office space at a lower cost than what you would pay for an entire office building or suite, as well as providing access to resources like the internet and printers that you may not be able to afford on your own. Many co-working spaces also offer discounted rates for memberships if you plan on using their services regularly.
Networking opportunities
Co-working spaces allow professionals in various fields to meet face-to-face and exchange ideas about business strategy–and maybe even become friends! This is a huge creativity booster and can lead directly back to increased productivity, thanks largely due to their shared experiences within this common space between colleagues within the organization as well as other tenants sharing space here.
Higher productivity
With people working together in close proximity (or even under one roof), there is an inevitable tendency to interact more frequently than they might otherwise do at home or in an office building by themselves. This leads not only to greater communication between workers but also stronger relationships between them–which means better teamwork when crunch time comes around!
Market Expansion
Businesses looking to expand and enter new markets now can do so almost overnight, thanks to co-working space. Since co-working spaces are largely concentrated in CBDs or prime locations in major metros, it’s much easier for businesses to expand into new territories, now.
Access to otherwise out-of-reach resources.
One of the big advantages the co-working offices provides is increased access to resources that would otherwise be out of reach for many smaller businesses. For example, many co-working spaces have in-house lawyers who can help you draft contracts or incorporate your business; some even offer free legal advice on an as-needed basis. Most also have meeting rooms where you can hold meetings with clients or prospective investors–and if you need more space than that, there’s probably another member who would love to share their office with you!
Outsourced facility management
When you lease space within co-working premises, your cost includes facilities you would otherwise have to shell out for. We’re talking cost of electricity, utilities, even coffee and pantry items, and of course, the people to keep things running. By taking away the chore of managing these items, co-working properties free you to focus on core business matters.
The benefits of working in this environment are numerous: increased flexibility, job satisfaction, and collaboration among coworkers (to name just a few). As more companies begin to recognize these benefits and offer them to their employees as an option or even as standard practice, we can expect co-working spaces to become increasingly common within the commercial real estate industry.
Is it any wonder that co-working spaces are becoming more popular with employees and employers alike.
The Impact on Commercial Real Estate
The rise in demand for co-working spaces has led to increased competition, which can be good news for commercial real estate. As more companies look for space to rent, developers will have more options available and tenants will be able to negotiate more favourable terms. Developers’ ability to accommodate evolving demands of this new demographic is likely to play a big role in commercial real estate market share in the days to come
. The shift in market dynamics is also likely to benefit commercial real estate investors looking at buying properties that are already occupied by co-working companies; such properties will likely command higher prices due to their perceived value as “future-proofed” investments.
Challenges Faced by Commercial Real Estate
The popularity of co-working spaces is a challenge for commercial real estate.
The rise of co-working spaces has come at a time when rental costs are rising, availability is limited and competition for prime locations is fierce. As such, landlords may be less willing to negotiate with tenants in order to keep them from leaving their buildings for the greener pastures offered by these new businesses.
Opportunities for Commercial Real Estate
As with any other industry, real estate too grows through disruption, and co-working spaces have surely catalyzed the entire concept of space leasing. The ability and willingness of real estate developers to adapt to changing customer demands, and create innovative solutions, including leveraging technology will be key to growing market share.
Players are already offering space conducive to a variety of co-working spaces–some offer dedicated desks or private offices, while others feature open floor plans where tenants can choose whether they want privacy or collaboration (or both). These types of offerings provide flexibility for tenants who may need either option at different times during their workday or week.
Potential Pitfalls
One of the biggest potential issues for co-working spaces is consolidation. Co-working businesses that grow faster than others will inevitably become dominant players in their markets, expanding their reach and influence over other smaller competitors. As such they may be able to exert more control over pricing and availability of space–which could lead to higher costs for tenants looking for office space at a co-working location.
Technology can also prove to be a disruption. New and emerging technologies like virtual reality (VR) or augmented reality (AR) can be complete game-changers. However, these require expensive investments in equipment before anyone can use them effectively at work or home during regular hours.
Conclusion
Co-working spaces offer excellent space for businesses to work and collaborate with other professionals in their own or different industries. This is especially true for startups that may not have the resources or capital to rent office space on their own. Co-working spaces provide them with the opportunity to connect with like-minded people who can help them grow their businesses while also giving them access to tools they might not otherwise be able to afford on their own.
The growing popularity of co-working spaces has an impact on commercial real estate as well, with many developers and property investors beginning to recognize the value tenants for these bring. And they are beginning to do what it takes to capitalize on these opportunities.
