November 29, 2023
More and more professionals are choosing to ditch the corporate environment in favour of working for themselves. Some corporations moving out of physical addresses in favour of greater fluidity. There is a growing contingent workforce and project based working is becoming more popular, meaning that business are contending with employee fluctuations that the traditional rental model struggles to accommodate. Co-working is the new buzzword in the office market – leveraging off the ever improving ability to work remotely. The digital nomad is redefining the perimeter of the traditional office.
Co-working has a sense of community engagement and is collaborative
You are working alongside similar like minded professionals. It beats working in a coffee shop or from home. There is much anecdotal evidence suggesting that moving from home to work changes your mindset, users are now demanding more than a desk and this will continue.
My prediction is that co-working practices will continue to become more sector specific, enabling the ability to pitch for larger projects. This is where the market will become segregated – there will be a greater degree of premiumisation. No longer will high speed WiFi, an all-in-one printer and an instant coffee machine capture the consumer. The modern professional wants design-centric working spaces, statement pieces and a variety of different seating options. Where and how you interact with your clients will become increasingly important, giving them something to post on social media.
Design can only go so far to attract “tenants.” The quality and access to a web of shared services will become very important. Legal, IT and Finance professionals on stand-by to service queries – this maybe physical, remote or automated. Memberships might include these or charge per use. An “uberised” workforce will still require specialist help and these services will adapt, immediate and efficient help will need to be on standby.
So, how will this be profitable for the office landlord?
Large REITs will continue to get revenue from traditional tenants and overtime adapt as an increasing amount of space will be taken up by co-working hubs. A regular income will be ensured through membership. Large operators will opt for a multi-site model, whereby, a member can utilise a number of spaces in a city or a country.
Smaller landlords will join consortiums to access a greater number of users and a range of collective benefits. There will also be stand alone hubs that own their own space, with some co-workers arguing that the community should come first over physical real estate.
Loyalty will become an ever increasing issue, as the general move away from lock in contracts will create headaches for operators, they will undoubtedly look for answers from airline and hotel loyalty schemes.
Moving towards profitability, a variety of different tactics will be employed to earn additional cents – lower cost lock-ins, tiered membership, add-on services and F&B to name a few. Selling singular memberships will always make the road to profitability arduous. Capturing the corporate market will be important as it will enable economies of scale. Opponents would argue that this could lead to the degradation of the “community spirit.” Creating a multi-faceted model with intimate co-working spaces, as well as, hot desking platform might be the golden goose.
Who will manage these services?
There will be lots of external providers adapting their offerings from traditional property management groups to hotel operators. Some landlords will, of course, choose in-house management.
One thing is for sure, co-working is not going away anytime soon. Key players in the market are already valued in the tens of billions, with millions more subscribers to capture – the only way is up.
Do you agree or perhaps even have a different view? We would love to hear your thoughts
