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Coworking is here to stay and the market will grow over time
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As I went about doing my business in the second half of 2019, to help growing companies find the right office space for themselves, I would also come across articles being written about the untimely or inevitable death of coworking. There was a disconnect between the high-quality conversations I was having with clients during the day and the projections I was reading about on my commute home. Those two narratives didn’t add up. I couldn’t make sense of what I was hearing and seeing.
Here are the facts - Coworking is here to stay and that market will only grow over time. By definition, because you’re squeezing more people into the same sized workspaces, you can make two to three times more money back on those spots, if you can fill those seats. This change represents the evolving needs of today’s workers. Instead of prioritizing more space to stretch out, people are valuing the advantage that a short-term lease can offer them. They’re spending their money differently than before and in turn, getting back a different set of resources.
Many SquareFoot clients over past years have turned to coworking for the benefits that these spaces uniquely offer. The bad press hasn’t scared them from entering those locations, which continue to offer them the freedom and flexibility that they covet and value. Our conversations with these clients are not around whether to do coworking at all, rather how to select one company over another and to layout for them, specifically, what they can expect from the coworking space of their choosing. There are countless options, and all remain the right place to go for a certain type of customer at whatever stage of growth they’re at or are embarking on next.
In truth, coworking isn’t the revolution itself. That’s happening around lease flexibility more generally. The shifts in thinking about CRE have been happening more slowly over time, it just has increased steadily over the past few years. That flexibility stems directly from landlords opening up their eyes to today’s businesses, particularly startups, that simply aren’t willing to sign the long-term leases that were expected of them. Who knows what 10 years down the line holds for these organizations? These are not your father’s companies.
Because SquareFoot’s clients tend to be in the earlier years of their company stories, we have heard a recurring message from them - those long-term leases are obstructions and obstacles in the way of their success. They want to get the lease out of the way so they can get back to work. That’s why coworking has emerged as such a valuable and viable solution for them, and that’s a message and mission that we don’t see stopping any time soon. But it also got me thinking about how else we can resolve this issue for those in need, by working directly with landlords.
That’s why we launched FLEX by SquareFoot last year, to address this middle of the market - people who want office spaces of their own and to sign leases accordingly, but prefer not to be tied down to a 10-year lease. In addition, last year we acquired PivotDesk, to give a seat or a handful of them to a company that can fill unoccupied ones at a ‘host’ company. Pairing these two companies up solves two problems at once, and gives everyone a better deal to work with. It’s not a coincidence on the timing either with our announcements of growing into flexible office space solutions. The success of coworking ushers in a new era when tenants can rightfully negotiate for spaces and deals that cater better to their growing needs.
For some time, coworking has served as the only option for companies that fell into this in-between category. We foresee that changing, but not at a loss for the coworking industry. Rather, more and more companies that were most recently in traditional settings, but didn’t really belong there, are waking up to the new options. On the flip, some of the businesses that have relied on coworking for some time shouldn’t have been there. For too long, we’ve been forcing fits rather than dealing individually with which type of space is right for this company. One of the things you learn from more than a decade in CRE is that there is never a one-size-fits-all solution.
So, through that lens, I remain excited about the prospects and possibilities that coworking presents.
For generations, we have dealt in and addressed commercial office space for companies. But I have the impression that for a portion of the industry, there were unsatisfied clients making due with what was available to them. Through listening to them, and adjusting our offerings to better serve them, we can rebuild the industry to support their growth and expectations. Coworking should be something those who use it love and swear by. Let’s put those clients into those spaces. Then we can find the right locations for the next ones.
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