Last year we saw choice come to the forefront as workers said ‘no thank you’ to a return to the office. Brand and amenities were all the rage and will continue to be the new ‘it couple’ of coworking. Real estate is still on unsteady ground and by unsteady ground we mean they’re standing on jell-o. More to come on hotels and hospitality.
WeWork did a great thing for the coworking world: It made the term “coworking” mainstream. Coworking is increasingly understood to be more than just an open room, kegs and space exclusively for freelancers and startups. But there’s still work to do. Back in 2018, I was offering massive suite spaces to one of the largest accounting firms in the world at my coworking space. Coworking has evolved but the understanding of the terminology has not. Coworking includes office space, meeting rooms, events and all the amenities it is not always open and brospace
Everyone is talking about “flexible workspace.” Flexible workspace is just a term the real estate world uses to describe chopping up space and offering flexible terms. As far as SEO it’s a solid zero. Anyone can offer a space; very few can build a community. Flex is not coworking and it’s adding to the confusion. Not a fan.
Real Estate Reckoning 2.0
We are four years away from the majority of US leases coming up for renewal. I believe that we will see the majority (yes, majority) of businesses choose to let go of a large portion of their commercial leases in favor of letting employees work from wherever they choose. Large commercial real estate companies have tried and for the most part failed to launch coworking/flex brands. They all have “flex teams” but they’re not moving the dial in a meaningful way. It doesn’t look for good real estate. Sorry, I’m not sorry. This is an industry ripe for disruption.
Hotels and Hospitality
You wanna know who is looking good? Hotels and hospitality. Look at what Accor, Citizen M and Lifetime are doing. They’re launching brands that are taking hold. I’m betting that hospitality will get its act together far quicker than the real estate industry. Why, you ask? Because they know how to operate space and focus on hospitality (which most coworking brands say they have but don’t really.)
Have you noticed everyone is buying a “retreat” space? It’s smart. As office flounders about, smart companies are taking their employees off for experiences and collaboration not meetings. They’re bringing everyone together with purpose and nature. What’s not to love? This area will be exploding.
Healthy Humans in Healthy Places
We all know about physical health. What are you doing for mental health? Gen Z is in a mental health freefall and up-and-coming generations aren’t doing much better. COVID was an accelerant poured all over our mental health crisis. We all have to help find the solutions; they don’t just appear. We must decide to make this a priority and have uncomfortable conversations or we will continue to bury humans that feel they will never get better and take the route of death by suicide. Brutal, but I’m trying to get your attention. Space where people feel belonging and people know their names matter. Build more.
You do still need to address the physical health of your space. How is your air quality? The health of your building? How old are the air conditioning units? If you haven’t read the Healthy Building book here is a link for you. Get it in your cart. This will future proof you.
Environmental, Social, and Governance (ESG)
Younger generations demand you do better. Make it happen or you will be passed over. Rant over.
Time to Re-design
Did you change your design? People overwhelmingly said they want space to connect and space to recess. It’s time to next level your space or at least update it. Not sure what to do? Have you asked your members? Hired a designer? Start there.
People still need, want, crave and deserve space where they can connect to other humans and feel a sense of belonging. Community will continue to be buzzy as more and more operators try to build it and many more fail.
This Quote from Brene Brown is epic. It’s from the podcast Dare to Lead, an episode with Simion Sinek and Adam Grant called What’s Happening at Work, Part 1:
“Is there a disconnect between what we believe, what we know from data, what we know from experience and the pressure of earnings reports, the pressure of performance … is there ever going to be a time where people understand that the human connection way is the only way, not just for people and planet but also for profit?”
As corporations empty their headquarters into coworking and flex space, we’re going to see demand hockey stick. If you’re not thinking about expansion, you should be. As an added bonus, demand is very fluid at this moment (winter 2022 we’re seeing lots of demand for meeting rooms, day offices and phone booths—and little demand for large suites.) You have to be nimble and open to change and redesign on the fly. We’re going to see lots of operators managing space for real estate. As corporations shut down more and more space we’ll see a massive, yes massive spike in the need for quality space run by humans that understand how to grow community. Enterprising entrepreneurs will rise to meet the demand in many new and surprising ways.
War for Talent
The war for talent will affect us on a supply and demand side. You’re going to need more workers to meet the demand and you’re not going to have enough supply. In addition, corporations will be sending people to you for retention. People that work out of coworking space are happier, have better networks and feel a sense of belonging. We know this because we did the research. I recently sat next to a sales executive on a plane who said they don’t even ask people where they live in interviews, because it doesn’t matter.
The Market in General
Coming back from the pandemic was disjointed. Some cities came back fast and furious and others faltered. Hybrid was vilified and simultaneously put on a pedestal as the best things ever. Corporations struggled with what message to send out and frequently got it wrong. Real estate is like watching a slow motion car crash.
Suburban coworking continues to thrive (as we predicted), but don’t count out the city. Cities still have so much to offer and younger generations are flocking there (see NYC.)
WeWork is in a world of hurt, which means investors are not going to be easy to convince. It will get harder for smaller operators to pencil a deal. IWG and Industrious , on the other hand, is soaring. Licensing and franchising will both gain traction. New models and niches will emerge as we enter a time of accelerated growth and opportunity.
Aggregators are everywhere. The ones that will win are the ones that find new and inventive ways to bring operators data and leads that can help them better run, grow and manage their business. I also stand by the prediction I made last year about a lot of them being bought by RE as they continue to struggle. I mean, did you see all the acquisitions that Instant did via IWG?
This article appears courtesy of GCUC – read the full article here.
FLEXIBLE WORKSPACE AUSTRALIA
Flexible Workspace Australia is the peak body for coworking and flexible workspace providers and partners across all cities and regions of Australia.