The 23rd GCUC event is taking place in London this week – its first in the UK. And while GCUC Director Liz Elam informed the audience that the event has an overriding wellness theme, so far, the standout topic has been something a little different: ‘nichification’.
The growth of niche spaces appears to be gathering pace, and they take many different forms; Elam herself noted that whereas a space with a yoga studio might once have been considered niche, now they’re becoming part and parcel of the industry – and that industry is not only growing, it’s diversifying, one space at a time. With that in mind, here’s a quick recap of the key discussion points from the morning session of Day One.
James Rankin, head of research at the Instant Group, pointed to a future of “nichification”. As the UK industry grows, he expects flexible workspace operators to evolve and provide their occupiers with more choice not just geographically, but most notably in terms of the service offering.
It’s not surprising; London is home to the largest flexible workspace market in the world and competition is soaring, with suggestions of saturation in some central areas. The message is clear: differentiation will help operators stand out in an increasingly crowded market, and attract members that are more likely to remain loyal. Why? Because a niche space can match their specific needs – be it in-house childcare or sustainability – better than any other generic space.
“Coworking was not invented to maximise profit”
Carsten Foertsch, CEO of Deskmag, delivered a quick glimpse into the UK edition of the Deskmag Coworking Survey 2018. One statistic finds that 60% of spaces in the UK are unprofitable; yet Foertsch noted that the first coworking spaces were built not to create profit, but to improve the working lives of people by forging connections, building communities and beating loneliness.
Among the key highlights from Foertsch’s slimmed-down results on the UK industry, he revealed:
- Around 40% of UK spaces are profitable. Of the remaining 60%, some are brand new or early stage spaces; others offer coworking as a non-profit amenity (and generate revenue by upselling other services); and the rest – around 10% – are profit-led but are not generating enough revenue.
- The UK is home to a high proportion of chain workspace brands. Almost 50% of coworking spaces are run by a company that operates more than one space.
- The average lease length of flexible space in the UK is a staggering 78 months. Roughly 40% of people rent a space for at least 10 years.
- There is extreme polarisation. Around 57% of spaces are smaller than 5000 sq ft, while 20% are bigger than 20,000 sq ft.
- The UK is home to a high proportion of niche and curated spaces. Only 2 in 3 spaces are open to everyone; the rest only permit people or companies from specific sectors.
- Around 60% of survey respondents in the UK believe the number of spaces is just right and deny there is a coworking bubble. Less than 20% say there are too many spaces.
“Technology is the oxygen of business”
Mark Bott, Head of Serviced Offices at Colliers International, says that there is “definitely room to grow” in London and particularly across the UK regions. For new market entrants, Bott advises finding a space that is close to transportation hubs, particularly in city centre locations, and to focus on your amenities.
“Showers, bike racks, Wi-Fi – these are not just nice-to-haves. These are our clients’ top most requested amenities.” Above all, he noted that “technology is the oxygen of business” and stressed the importance of high-grade Wi-Fi and connectivity in your building.
“Always ask yourself – could you fill the building in a recession?”
Charting the story of The Office Group, founders Olly Olsen and Charlie Green discussed their brand’s meteoric rise and how they overcame various obstacles along the way. Among the current challenges facing The Office Group – along with every other flexible workspace operator in the UK – is Brexit and the possibility of a downturn.
“Whichever way Brexit goes, we’re going to have to brace for change,” said Green. And even without the added complication of political upsets, he advises: “Always ask yourself, could you fill the building in a recession? It has to work in a tough market.”
For Olsen, one of the major challenges is the threat of market saturation.
“We, as an industry, should be careful and disciplined about the rate at which we grow.” Citing a wave of new market entrants from other industries – “even Hooters in Tokyo now offers coworking” – he warns that too many operators in the same area, providing the same basic offering, is apt to put pressure on pricing and drive values down.
On that note, both Olsen and Green referenced the growth of niche and sector-specific workspaces, which they feel is enriching the flexible workspace industry. “There are a lot of offerings that are very similar,” added Green. “Get your sector right and differentiate. Stand out in some way; it will help you to rise above the challenges.”
“Niche is good business”
Why is niche having its heyday? “I don’t think niche is having a heyday; it’s good business,” said Ursula Errington, founder of Signal Bordon. “It answers the first rule of business: know your customer.” Niche spaces, she says, enable operators to attract a certain demographic and serve their needs much more accurately than a fully inclusive space.
In fact, she believes that vanilla spaces will eventually get pushed in the niche direction, particularly in terms of their marketing. Even those that offer generic space will eventually come to recognise higher demand from specific sub-sectors – such as tech firms or creative agencies – and they will adjust their marketing strategy to attract more of those ‘easy wins’. Some will even go all-in and completely re-define their offering.
“Maybe we need to re-define niche,” she said. “We’re all here because we’re passionate about facilitating people and connections. It’s bonkers that having a specific service, such as providing childcare, is considered niche. We are not ‘the other’”.