Coworking Is Defying All Odds

The coworking industry has defied expectations amidst the current economic crisis, and demand is starting to grow again.

Still, the sector has challenges to overcome especially in terms of how to keep people safe in their naturally collaborative, shared environment. And while some providers will not survive and others will be forced to cut down their footprint, it is clear that companies will start leaning on flexible workspace models.

According to data from Instant Offices, demand for flexible offices dropped to 35% of pre-pandemic levels in the UK. However, occupancy levels remained relatively steady with average occupancy in the UK falling from 92% to 77% according to Workthere.

“When looking at assets leased to flexible operators, valuers have been working on the assumption that in a downturn, all the customers leave,” said Cal Lee, Workthere Global Head. “This is the worst possible recession and it only dropped 15%. That’s very positive, and demonstrates the strength of the sector in the longer term.” 

Profit margins took a big hit over the past few months as operators offered discounts ranging from 5% to 50%, which leaves the future of certain providers uncertain.

Workthere identified red flags that could indicate whether an operator would be in trouble, particularly those who rely on long-term leases, small businesses as their core customer base and a lack of support from backers.

Regardless, demand is growing as restrictions begin to ease up. In areas where lockdowns have been lifted, demand has risen above pre-pandemic levels.