Gartner Reveals Real Estate Leaders’ Top Concerns Regarding Coworking

Published on June 7, 2018 - By Cecilia Amador

• Gartner recently published its research titled “Integrating Coworking Into Real Estate Portfolio Strategy”
• The research looked at the increasing corporate adoption of coworking, and the factors that are still hindering widespread adoption
• It also posed the argument that in order for coworking to work for corporate real estate, companies need to have a holistic strategy behind the decision

Corporate adoption of coworking has been steadily on the rise over the past 12 to 18 months. And although companies of all sizes and across a wide array of industries are clear about the benefits that coworking can offer their business, there still are several barriers that are keeping more companies from integrating coworking into their real estate strategy.

Gartner’s recent research, “Integrating Coworking Into Real Estate Portfolio Strategy”, states that “coworking firms are more adept to meet enterprise needs than ever.”

Jamie Hodari, CEO of Industrious, explained to Gartner that “real estate used to be a very top-down decision, but now it is democratized where real estate centers on employee needs. That requires a diversity of spaces, amenities and scale that are extremely difficult for organizations to provide. Shared office spaces are dedicated to that sole task, and expertise lies in what makes employees productive and happy.”

On a similar line of thought, John Arenas, CEO of Serendipity Labs commented on the research that “coworking provides strategic solutions for optimizing and extending their (companies’) real estate platforms while adding flexibility and resilience.”

However, the researchers add, “despite the fact that coworking spaces provide benefits for portfolio flexibility and optimization, real estate leaders have concerns about coworking spaces; these concerns are holding back broad adoption.”

Much of this is due to the fact that widespread adoption of coworking by corporates requires a shift in the way real estate currently functions. This means that companies should look at how they currently make lease versus buy decisions, how they assess current and future locations, and how their costs and spends are broken down with regard to office space.

But, Gartner’s research found that another part of the issue lies in the hands of coworking and flexible workspace operators.

“Real estate leaders cite security concerns, cultural disruption and financial pressures as the top three challenges in this space (coworking).”

Security Concerns

We are not talking about door access and personal belongings security, though these are important elements as well. Large enterprises often handle and compile a lot of data, and employees are bound by confidentiality and non-disclosure agreements. This means that these companies need secure networks that are difficult to hack and that can prevent data leak.

Additionally, operators also need to consider noise levels and privacy issues here. Workspace layout can greatly affect privacy levels, especially when professionals are talking to clients or colleagues, either in person or the phone. There’s also the element of visuals and being able to see over the next person’s computer screen. Though people might not intentionally do it, open layouts and glass windows can lead to data and information leaks.

The Culture

Coworking spaces are all about community; they encourage interaction and collaboration between members and they are places where people bond with one another. Yet, the coworking community poses a risk for corporates as it “represents a steep cultural departure from typical office culture.” One of the issues companies see with this is that a traditional corporate office space “provides a common  sense of purpose and familiarity”; coworking spaces on the other hand, though they encourage connectivity and collaboration, leave certain employees “separated” from the rest of the team, which can translate to feelings of alienation from colleagues and the company’s objective.

One way operators are addressing this issue is by allowing corporate members to have their own entrances, allowing them to brand the space, and accommodating a large number of employees in one location. This provides a certain level of assurance for companies that their employees will connect with the coworking community without having to compromise their company culture.

Coworking is Expensive

Coworking is an attractive option for small and new businesses that do not have the necessary cash flow to lease an entire office floor. For large corporates, however, the situation isn’t the same. These companies tend to have the necessary cash flow to lease out a big space in a coveted location, and when they do the long-term math, this is a cheaper option than the one offered by coworking spaces, especially when they are looking beyond the hot desking membership.

Gartner gives the following example:

“If a company wants to have 10 dedicated desks and a six-seat private office for meetings, the occupancy expense per FTE would be over $9,500 (excluding taxes); that’s already more than the average total occupancy expense from our cost and space survey.”

Conclusion

Coworking operators can greatly benefit from catering to enterprise clients. It will impulse coworking growth and help risk-proof their business should an economic downturn hit. However, in order to do this, operators need to re-evaluate their value proposition and find ways in which they can align their service offerings for corporates as well as more traditional coworking users.

For some operators this may mean managing separate brands, for others it might mean entering into management agreements, or it might mean having specific locations for corporates and specific locations for SME’s, startups, and entrepreneurs.

The opportunity is there, but operators need to be resilient enough to pivot in the right direction.