Last year, approximately 11,000 co-working locations opened their doors around the world. In only three years, that figure will nearly double to 26,000. To give you a sense of scale, there are currently 24,000 Starbucks globally, which means shared workspaces will soon be as common as that friendly green mermaid found on almost every street corner (and probably as well-stocked with caffeinated beverages).
From a commercial real estate perspective, this means we can expect a fundamental change in the way the industry thinks of office space over the next few years. In a new global workplace trends report, Colliers International is looking ahead five years to forecast the trends that will drive enormous change in CRE—and ingraining the co-working mentality into real estate strategy is one of them.
First, our understanding of the co-working space will have to evolve. Many of us still think co-working is simply a term for the use of a shared workspace, primarily used by individual entrepreneurs or small startups on flexible terms. These spaces perhaps evoke images of millennial freelancers clustered at contemporary conference tables with pristine lighting, heads down and hard at work on their laptops. It’s easy to see how access to well-appointed meeting rooms and office equipment such as copiers and projectors have proven appealing in our surging gig economy. And these spaces can be accessed and paid for as little as an hour at a time.
But the magic of the co-working space is ultimately far less about real estate costs and amenities and more about the benefits that come from the close proximity of creative minds. As co-working spaces have become vibrant communities—some, like The Wing, a posh women-only workspace in Manhattan that houses a beauty room and café/bar along with meeting rooms, are even somewhat elite—larger companies and corporations have decided that they want in on the collaborative environment and creative juices that flow from these spaces.
Large companies are making room for flexible co-working options by licensing spaces for employees that are close to where they live, or providing a “pop-up” office for a specific project or client need. Microsoft recently shifted 70 percent of its sales staff in New York City to flexible/co-working spaces. Additionally, HSBC contracted for 400 desks in WeWork’s Tower 535 in Hong Kong. Large employers make up the fastest-growing market for shared workspace provider WeWork, because they like the flexible provisions and short-term commitment.
It’s becoming a question of access versus ownership. Companies are finding that they don’t need to own facilities or commit to long-term leases in order to provide quality workplaces for their employees. This paradigm shift will require an evaluation of “core” and “flexible” space needs. A “core space” is the real estate a company must rent or own over the long term for the business to operate. And it’s important to remember that today’s requirements may not be the same as tomorrow’s—especially as businesses go paperless, shift data centers off site and increase workplace densities.
“Flexible space” is the real estate that can be deployed quickly without long-term commitment, adjusting in near “real time” based on needs. It is space to accommodate fast growth or contraction groups, project-specific space that may go away or non-core functions that can be outsourced or automated. It is an acknowledgment that it is sometimes impossible to forecast space needs in a location in a way that justifies a standard lease. Companies that balance core and flexible space needs can reduce financial risks related to long-term space needs and be nimble in making changes as needed.
Building owners are also finding opportunities to revitalize underused spaces by transforming them into the type of shared work areas that are increasingly in demand. Already, many occupiers won’t consider a building without available flexible/co-working space. To remain relevant, commercial office buildings will need to create spaces that attract people to connect and collaborate—both within the leased office and outside of it in building common areas.
In the next five years, companies that thrive will be the ones that make flexible/co-working spaces an integral part of their workplace strategy, providing employees with opportunities for choice, connectivity, and flexibility. In the process, real estate and workplaces can become as dynamic as the companies who depend on them.