- Despite the dramatic impact that COVID-19 has had on coworking spaces, a new report provides a positive outlook for the industry.
- New demand may rise from enterprise clients who, faced with economic uncertainty, need increased flexibility from their workspace.
- In addition, the report highlights other member groups who are most likely to return to coworking, and what is drawing them to shared space.
Cushman and Wakefield recently published its report “The Changing Role of Coworking in the Workplace Ecosystem”, which looks at how coworking has been impacted by the health crisis and what the future could spell for the industry.
“A global pandemic is most likely not what respondents of coworking magazine Deskmag’s 2019 survey had in mind when asked about their outlook on a potential financial crisis.” – Cushman & Wakefield
While last year, most respondents of the survey reported a relatively favorable outlook during a financial crisis, the pandemic blew a hit to the coworking industry that no one foresaw. As C&W rightly note in the report, a major draw of coworking is its social factor, a draw that has become a drawback during the health crisis.
Various coworking operators have been forced to shut down their operations in certain cities, while others have gone out of business entirely. Many have had to ask their landlords for rent relief in order to stay afloat during the pandemic.
The struggles of coworking spaces have only been exacerbated by the fact that many members are also struggling financially, which means they have asked for their fees to be waived or cancelled their coworking memberships altogether.
Coworking Will Remain a Viable Alternative for Years to Come
Despite the dramatic impact that COVID-19 has had on the coworking industry, Cushman and Wakefield remain positive about the outlook for coworking spaces.
“New demand may rise from enterprise clients who, faced with economic uncertainty, need increased flexibility or they might require short-term space for employees during the slow phase-in or reentry into existing offices” while following physical distancing guidelines.
“Corporate occupiers’ office strategies may ultimately be changed by the current environment, and coworking could play a role in the future of work ecosystems.”
Though long-term the viability of coworking remains strong, the million dollar question remains: who will return to coworking in the short-term?
To answer this question, C&W looked at the main users of coworking spaces pre-pandemic.
“In its 2019 Coworking Survey, deskmag found that freelancers and employees of large corporates were the most prominent users of coworking space. The share of users that are part of larger companies has been on the rise, and flexible office providers are increasingly focused on attracting and retaining enterprise-level clients.”
C&W divided coworking users into three categories:
- Enterprise users
- Startups and SMEs.
Below are C&W’s reasons for believing that these groups will eventually all go back to coworking.
Though freelancers represent the member segment most likely to have canceled or paused their coworking memberships during the coronavirus pandemic, there are a few good reasons to believe that they will return to coworking eventually.
For one, freelancers are among the most likely to welcome the return to the office after working from home for months. Given that they typically work by themselves, they are more prone to feelings of loneliness and they were the ones that mostly benefited from coworking’s sense of community and the social interactions that these spaces offered.
“Personal wellbeing and a sense of connectedness suffer in WFH. All of which plays in favor of this user group welcoming a return in order to be around other workers again, even if at a distance.”
Potential barriers that might prevent freelancers from going back to coworking spaces include anxieties over public transportation and their financial stability.
Even prior to the pandemic, coworking spaces were already focusing on attracting more corporate users. “In the current environment, many providers are placing even more emphasis on signing corporations to ‘enterprise’ locations. These users tend to take more space than freelancers or smaller entities, and they sign longer leases, making a greater commitment to the location and offering more financial stability to providers.”
But why would large companies turn to coworking in the post-pandemic era?
While many corporate employees are currently working from home, this will change as lockdowns and regulations are lifted. By using coworking spaces, large companies will be able to provide their employees with more choice and flexibility.
“Increasingly employees are looking for the flexibility to choose the best workplace for the tasks they need to complete. For example, a core office may be best suited for client meetings. WFH may be best for intense periods of focus. Coworking locations in both urban and suburban submarkets could provide these companies with more choices for employees to experience the benefits of an office work environment but in a location that offers greater convenience.
Using a third space can also help companies ensure that they are following physical distancing protocols and in the short-term, many organizations will find that they need access to short-term, flexible space.
Startups and SMEs
According to C&W, venture capital flows remained strong in the first half of 2020. However, C&W predicts that “the sector will most likely be impacted by the economic headwinds slowing activity through the end of the year”, which could slow down the return of this sector to coworking spaces.
Despite this, as activity picks up, startups and SMEs will continue to have a need for flexible office space requirements. One of the main advantages that coworking offers this group is access to short-term real estate, and in the post-pandemic era, few small businesses and startups will be looking to sign long-term leases and enter into extensive commitments that require a lot of initial investment.
What Does the Future Hold?
A lot of potential for coworking, both in urban and suburban settings.
“The renaissance of the suburbs will accelerate and attract more corporate occupiers.” In addition to this, many professionals will value working closer to home as it would shorten commutes and reduce time spent on public transportation.
Furthermore, “taking up several coworking locations throughout suburban markets would allow companies to maintain flexibility as their staffing ebbs and flows.”
Although coworking has been greatly impacted by the coronavirus pandemic and the ensuing financial crisis, “it’s likely to remain a viable and important alternative for a variety of user types in the years to come—from self-employed freelancers to small, medium and large organizations.”