The Leader Magazine

MAR 2017

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MARCH 2017 59 Coworking risks and rewards Taken together, both coworking types – independent and employee – report being happier than non-coworkers (79 percent to 57 percent), according to Deskmag. In addition, 71 percent of coworkers say they're more productive in a coworking space; 68 percent say they're better able to focus; and 62 percent believe the quality of their work is better. Research has found that remote work increases employee engagement (see Figure 1), especially for those who telework one to three days a week. Flexibility is also a big draw for independent contractors and freelancers who continue to account for large numbers of coworkers. Eighty percent of independent contractors report being satisfied with their work because of the autonomy and flexibility it affords. Employers, too, like the flexibility of contract workers, especially when it comes to the cost savings provided by a scalable workforce. According to the Intuit 2020 Report, 80 percent of global corporations plan to significantly increase their use of contingent labor in the future 11 . Such a forecast could bode well for future coworking demand. As Deskmag recently reported, 63 percent of coworker members worked at home, a coffee shop or on the move prior to joining a coworking center 12 . As a business model, though, coworking is not without a number of risks. The concept largely came online in the wake of recession when vacancies were high and rents low. Nearly half the leases of U.S. coworking spaces are now up for renewal by 2018, when terms likely won't be as favorable. The coworking industry is also dependent on a relatively large number of members to cover its lease obligations and other operating expenses. In the U.S., typical coworkers pay a low monthly fee (as little as $220 a month at WeWork) and remain fee-paying members of a coworking space for an average of 19.7 months. The challenge is for coworking operators to find new members to offset turnover and provide an experience that could justify future fee increases. Evidence suggests the latter may be possible, as 94 percent of full-time coworking members believe they're getting a good value 13 . Competition could soon prove to be a factor, too, as more coworking hubs come online and free and nontraditional spaces enter the market. Public libraries in New York and Washington, D.C., for example, have recently opened free coworking centers. Other locations have opened in hotels, gyms and restaurants. If Spacious (a start-up now in New York City) has its way, tables will be full of people hours before its restaurants open. For $95 a month, members will have access to upscale space in trendy eateries in London and across the U.S. Memberships include a receptionist, Wi-Fi, refreshments and early-bird access to a restaurant and bar. In smaller urban areas, coworking may have already reached saturation. Eighty-five percent of U.S. coworkers say there is adequate or too much coworking space available in cities with fewer than 1 million inhabitants. Additionally, just one in four coworking spaces currently in operation is profitable, though that could be because so many of them are recently opened. Servcorp's annual report indicates it takes two to three years for a new office to break even 14 . The biggest uncertainty, though, may be the attitudes of future generations toward coworking. While the majority of today's coworkers (76 percent) prefer to work in an open space rather than a private office, will that trend continue into the future? Or will today's "we space" employees eventually want more "me space"? Considerations for CRE leaders In spite of the risks, coworking may hold solutions for CRE leaders – considering that 96 percent of companies expect them to improve workplace productivity and 66 percent of CRE leaders report being charged with increasing portfolio flexibility 15 . To date, coworking has been an effective way for portfolio managers to fill hard-to-lease space. More than half (55 percent) of coworking locations were vacant for more than six months before being leased, and nearly half (45 percent) are in buildings more than 50 years old 16 . Startup expenses for coworking spaces are far cheaper than traditional office space, with average opening costs under $100,000. To help CRE leaders decide what action, if any, they should take with coworking, HOK and CoreNet Global's UK Chapter developed the following suggestions and best practices: • Look to established coworking spaces for ideas about what people do and don't like. • Think about how second, third and fourth places can increase portfolio flexibility. • Ensure corporate brand and culture are reinforced both physically and virtually. • Be intentional: Make change happen rather than allowing it to happen. • Evaluate needs of introverts as well as extroverts. • Because people cost far more than office space, make sure the Figure 1

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