The rise, fall and rise again of coworking

by Sophie Berrill
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coworking

Coworking spaces were launching and expanding across major cities everywhere prior to the pandemic.

Thanks to technological advancements and changes in the labour market, remote and flexible work had become more commonplace. Freelancers, ‘solopreneurs’ and start-ups, seeking community and amenities, flocked to this ‘third workplace’ between the office and the home.

As a result, the second half of the 2010s saw aggressive growth in the sector. A 2019 survey by the coworking magazine Deskmag found the number of spaces globally increased from 8900 in 2015 to 22,000 in 2019.

This disruptive new organisational form had some saying the future was flexible, with optimists in the industry predicting almost a third of corporate real estate portfolios would comprise flexible space by 2030.

Then came the ‘great disruptor’: COVID-19. The rapid proliferation of coworking spaces suddenly ground to a halt.

In Melbourne, eventually to become the most locked down city in the world, the situation was “desperate” for local operators. Some, like depo8 in Prahran, jumped ship early in the pandemic and closed altogether. In the inner eastern suburb of Richmond, LaunchPad stayed open even though its occupancy dropped from 80 percent just pre-pandemic to 10 percent at its depths.

“When all the uncertainty started, no one was moving into coworking spaces, so the name of the game was trying to keep the members you had,” LaunchPad’s co-founder David Thomas tells Facility Management.

The short-term forecast was grim, but the industry looked hopefully to the horizon for an even bigger boom post-COVID. The logic went, with more people working at home, a permanent hybrid workforce would lead to an uptake of coworking spaces long term.

So, have those predictions come to pass?

According to the industry’s new peak body, Flexible Workspace Australia (FWA), all markets have experienced a bounce-back after the height of the pandemic, albeit differently from state to state, the CBD to the suburbs and mid-tier to premium spaces.

“Melbourne is having a positive bounce, but is lagging [behind] the rest of the country due in large part to the greater [number] of people and days being worked from home, and government restrictions and recommendations,” says FWA’s co-chair Fiona Mayor.

“Most other cities and states are now at pre-pandemic levels or beyond.”

With the labour market currently tipping in the worker’s favour, changes to employee expectations have also brought about new trends in coworking. For many, short commutes have become important to achieving a better work/life balance, says Mayor.

“Suburban and fringe locations have filled up faster than CBD locations, while regional locations are mixed,” she says.

In keeping with those trends, Hub Australia recently opened three ‘city fringe’ locations in Melbourne to provide more work-near-home options. The company’s chief property officer John Preece says 85 percent is the industry standard occupancy rate as society moves out of COVID-19.

In Melbourne, eventually to become the most locked down city in the world, the situation was ‘desperate’ for local operators.

LaunchPad’s occupancy is not quite there yet, recently passing 50 percent, but its average tenure is back above 12 months.

This is despite spaces cutting all use of contracts in favour of a ‘truly flexible model’. LaunchPad’s owners made this unique decision in July 2020, as they found risk averse businesses had no interest in signing long-term contracts in unpredictable times.

“If [tenants] decide to leave, they could stand up tomorrow and walk out the door, and their total commitment is the end of the last invoice they paid,” Thomas says.

“With the labour market currently tipping in the worker’s favour, changes to employee expectations have also brought about new trends in coworking.”

Greater flexibility could be attractive to large CBD organisations that have not yet returned to a Monday to Friday on-site operation. While early predictions of the office’s death may have been exaggerated, the pandemic has forced some companies to reassess their CRE (corporate real estate) portfolios and incorporate shared offices.

LaunchPad tends to avoid these large enterprises. A self-described ‘quirky’ coworking space in the middle of the price range, it targets businesses of two to 10 people looking to grow. In Thomas’ eyes, the more conservative big corporates are starting to “fundamentally change” the culture of other coworking spaces.

“It’s become more, if you like, isolationist,” he says.

“The companies that are in there are not the sort of companies that will plug into a shared community. So it’s almost like the wrong demographic. But that’s just my opinion.”

At the other end of the spectrum, some large companies are trying to incorporate coworking culture into their traditional office locations. Facility managers are looking at ways to mimic some of the lessons of coworking, like activity-based working, in order to ‘earn the commute’ of employees.

“Cowork companies (as an industry) by their very nature, have an advantage in that they treat customers like guests, while businesses treat their people like employees.”

“If anything, there will be a first mover advantage for the organisations that really lean into this and walk the talk around giving choice, flexibility and options to their employees,” says Lawrence Goldstone, a PwC partner and investor in a Melbourne coworking business.

In Goldstone’s opinion, there is currently a lack of activation and engagement in traditional office environments.

“Cowork companies (as an industry) by their very nature, have an advantage in that they treat customers like guests, while businesses treat their people like employees. This is a fundamental difference in the style and approach around making spaces work.”

Whether managing, moving into or mining ideas from coworking spaces, FMs can certainly learn a lot about servicing employee and business needs from this industry in the new world of work.

This article originally appeared in issue two of the Facility Management digital magazine. For a limited time, we’re giving all readers free access to the digital magazine for three months from the date they claim it! That includes access to all back issues and our next issue, out in June. Claim your access here.

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