In June, Research and Markets released a report on the coworking space market. According to the report, the global coworking market is expected to grow from $7.97 billion in 2020 to $8.14 billion in 2021.
Coworking is currently in a state of flux. In most markets, coworking’s physical presence amounts to less than 10 percent of the total office inventory, yet its impact resonates throughout the office-using tenant base. The Research and Markets report indicates the market’s current growth is the result of companies resuming operations and adapting to new ways of working in the wake of the COVID-19 pandemic. As companies navigate the highly nuanced hybrid workplace landscape to return to the office, coworking facilities can play an integral role.
Let’s look at the evolution of coworking and its future.
State of the Market
Modern coworking providers appeared in the market in the early 2000s to meet the needs of smaller, transitory tenants (and not just tech). Since then, coworking has evolved into many forms. Today, coworking spaces offer both long-term and short-term options, various membership levels, day passes, industry-specific offerings, and service- and experience-focused options.
Coworking spaces serve to both bridge the gap from an old office structure to a new model and provide support for additional locations or flexible meeting spaces. These spaces also support the hybrid workplace model. Whether companies need temporary space, alternate meeting locations, satellite offices, or third locations for employees who need a workspace that isn’t home or the main office, coworking has something for everyone.
Since early 2020, as the COVID-19 pandemic forced shutdowns around the globe, coworking providers have undergone major changes. The coworking occupancy rate fell from 78 percent in February before the pandemic to 51 percent last fall. The dust is still settling on closings, acquisitions, restructuring, and downsizing on the roughly 580 million square feet of coworking space in the United States, but a significant portion is expected to return to the market.
Providers will likely first test their locations when offices reopen before they decide whether to close underperforming locations permanently. Some providers have already made these decisions. Breather shuttered its doors and returned its entire portfolio to the market; WeWork gave back space at several locations, but Industrious announced it would be taking over some of those locations; Knotel was acquired by Newmark, but it’s unclear which former Knotel locations the firm will keep; and several smaller, single-location or industry-specific providers have closed completely. Revenue sharing and franchising are two other options that providers are considering implementing to respond to market demands.
Benefits of Coworking
Ultimately, coworking provides a much-needed option for many different types of companies. Before employees begin to return to the office, there are some expectations that employers need to acknowledge and address. Employees need and now expect flexibility. The Great Work from Home Experiment brought to light that many employees don’t want to be in the office five days a week, nor endure a long commute. Though reports indicated an increase in productivity due to remote work in the early days of shelter in place orders last year, this increased productivity has waned and more people reported greater stress about working from home full time. Coworking provides a solution to both: those who don’t want to be in the office everyday and those who don’t want to work from home full time.
Another way that coworking can be beneficial is for child care, which is a significant factor for many employees. According to the Economic Policy Institute, U.S. infant care costs range from $5,000 to $25,000 per year depending on the state. Those costs represent 10 to 30 percent of the median income, depending on the state.
Employers haven’t had to address child care challenges or costs in the past and most parents were expected to figure it out and be in the office full time. Remote work has emphasized the reality that working parents need more support. An employer may not be able to offer on-site child care due to space or budget constraints, but if a working parent could roll child care and a productive workday into one location and not lose time in the car dashing to pick up a child or relieve the care provider, then it’s a win for employer and employee. This is where coworking can help accommodate working parents and employers.
The Future of Coworking
The most adaptive providers are now looking for ways to meet the new needs of employees as they navigate a return to the office. The coffee bar and ping pong table may still prevail, but more practical amenities and flexible membership options will benefit employers and employees. One size does not fit all among office-using industry sectors and the wide variety of coworking providers can help companies broaden services to employees and enhance the office experience.
Though much has been reported about some companies opting to work fully remotely, most companies, large and small, will opt into some form of office-centric or hybrid models. Within those structures, however, there will be a considerable amount of learning, adapting, and evolving. It’s an iterative process and companies can expect to make changes to layout and work styles over the next few years. As they fine tune the hybrid work model, coworking will likely be part of the hybrid work equation and aid in the transition of office space from compulsory to experiential.
Contact us for more information on how coworking can fit within your workplace model. Our team can help you find a coworking space that meets your needs.