4 POST-PANDEMIC COWORKING TRENDS.
Shannon Stiegler is the Vice President of Corporate Accounts and Partnerships at Premier Workspaces, where she has worked for the last 12.5 years, before which she had worked with Regus/HQ for 9 years. Shannon Nagel has served as the Vice President of Operations and Administration for Preferred Office Network, which works with enterprise clients in various markets, and has recently taken on a new role as Director, Enterprise Operations with LiquidSpace. Flip
Howard is the Founder and CEO of Work Suites, Texas-based executive suite company founded in 2001 who is pivoting to become a modern flexible workspace provider. Brad Krauskopf is the CEO and founder of Hub Australia, one of the largest Australian owned and operated coworking brands.
The good news? Many of the trends our contributors listed are continuations of some of the big events of 2020.
The challenging news? While approaches to these trends will vary for each business, our contributors all agreed that we’ll need to focus on flexibility and profitability for 2020 and beyond. As the industry continues to shift and change—for many markets, far more rapidly than predicted—a business model that can respond just as quickly as the industry while still maintaining profitability will be key.
Nagel said she and her team--which serves over 150 operators--found 2019 surprising for the ways it defined coworking—and how that redefining of coworking required owners and operators to continue to define and redefine their business models and practices.
“I think what was probably a surprise and a learning curve for me and my team was the fact that as our industry has changed, we’ve really had to embark on this larger education with Enterprise clients around what they are really looking for and what coworking really means,” she said.
So how do we respond to a changing industry—one that is expected to continue to grow exponentially in the next decade, even in the event of a recession—in 2020? Nagel, Stiegler, Krauskopf, and Howard offered the following focuses for the new year.
1. Focus On Profitability.
One of the big surprises to the industry from 2019 was WeWork—and the impact on the industry will likely continue into 2020.
“Premier has been in business for almost 18 years and never had an unprofitable year,” Stiegler said. “We are looking to maximize cash flow and profitability while many of the newcomers are focused on growth and any cost and valuation.”
Stiegler said that companies should carefully evaluate where they’re spending money, especially when it comes to special amenities and perks. While these “extras” can be an important part of a brand or space’s culture, she said it’s critical that owners and operators are always looking at whether these features are being used. She recommended cutting costs where you can and focusing only on the amenities and extra features that are being used and valued by clients.
Howard also advised a focus on profitability.
He said while coworking spaces keep pushing toward growth, they need to be careful to keep profitability at the forefront. He said landlords, while they continue to be interested in partnerships with coworking spaces, are more cautious, especially after the events surrounding WeWork in 2019. Many of them, he said, is looking for partnerships with coworking spaces that have a “track record of profitability.”
Krauskopf also noted that landlords will be looking for profitability as they continue to look to coworking as a promising business model. “The market and institutions are anticipated to become accustomed to valuing this income stream for the landlord, as they have done in the hotel industry, where management and franchise agreements are the norm,” stated a recent Hub Australia press release.
2. Expect Growth In Outlying Markets.
All four contributors mentioned an expectation for growth in secondary or outlying markets in 2020—largely due to an attempt to avoid long commutes and the continued move of companies of all sizes away from a long-term lease.
“The nature of what members expect from a coworking environment is changing rapidly. With continued investment in the industry, as well as new independent businesses entering the market and a range of technology serving flexible working spaces, we anticipate that the traditional office experience will only continue to evolve as we move into the coming year,” said Krauskopf.
“Smaller markets have not been as much of a focus (in previous years), but they probably should be,” Stiegler remarked. No one wants to commute, she said, and more and more companies are using coworking spaces to help their employees avoid the daily drive.
“Sometimes operators…think ‘I’m going to lose out to (a major city)’,” Nagel said. “I always tell them no, that’s not the case at all.” Nagel remarked that more and more companies are allowing top executive teams to work closer to their homes—something that’s becoming an important perk for employees while also increasing demand for coworking spaces that are closer to these clients’ homes rather than in the middle of major cities.
However, this doesn’t mean there won’t be growth in the more major markets in the next year as well. In fact, Howard predicts the opposite.
“The more competitors enter the market and the more supply that gets created…the more demand has grown,” he said. “My locations that have the most competitors around and are the ones that have done the best.”
Howard’s location plans to open an additional five or six locations in Texas this year—and he says he’s found he didn’t need to be as concerned about market saturation as he had thought.
“I don’t think we can build them fast enough,” he said of coworking spaces. In fact, he said that often, the barrier to getting new clients wasn’t an oversaturation of options but rather a lack of awareness—and as awareness grew, so did demand.
3. Diversify Services—But Don’t Specialize Too Quickly.
“Nothing’s really standardized,” Nagel explained about the coworking industry. For her, this reality hit home when clients started asking for different coworking options—but each of them seemed to have a very different idea of what coworking meant.
And as more companies move away from long term leases—a trend Howard is confident will continue even in the event of a recession—the different types of needs from clients increases, as does the seeming ambiguity of coworking.
For Nagel, this has meant developing a willingness to both offer different levels and types of services and also be willing to tailor to each individual client as far as possible.
“Have more than just one standard way of doing business,” she advised. While this shouldn’t mean always adapting to every client demand, Nagel explained that a little flexibility and listening to your clients goes a long way.
For Krauskopf, one of the ways to adapt to demand in his market has been a focus on going carbon neutral, while Hub also noted using tech to respond to customer needs.
Stiegler indicated the ability to stay on top of offering different services that are tailored to your clients’ needs is important. “We’re always trying to stay ahead of product offerings and applying what makes sense,” she said.
At the same time, Howard cautions against an over-specialization too quickly. “I think we got to some of those (hyper-specialized, niche brands) a little too fast,” he said. “There’s still plenty of room for coworking to grow in secondary markets and suburbs before it has to splinter into niches.”
Rather than trying to hyper-focus on a specific model or industry, Howard recommends focusing on the feel of a community.
4. Focus On (Balanced) Community.
Nagel predicts a growing need for a sense of community that makes your space into a positive, enhanced experience. “I think that’s going to be something that clients are going to come to expect and demand,” she said.
To develop a sense of community, however, Nagel said it’ll be about more than having more open work areas (and, in fact, this may not be the best option for every space). Rather, she said it’s about being thoughtful.
“Take into account the person as a whole person,” she said, noting that community managers can play a big role in learning about clients and finding small ways to recognize their needs beyond day-to-day professional necessities. She said the types of perks or services that create this sense of personal community vary by client and by space, but that health and wellness type offerings, as well as onsite childcare, seem to be increasingly popular.
Howard said they’ve found it important to find out what members want in a community, but also to look at other models (executive suites vs. coworking, for example) and figure out which aspects of each model make sense to incorporate into the feel of their space.
He said their process of creating an atmosphere for their space involved questions like this: “What is it about having a private office that people like, and what is it about having a community that people like?” And then, “How do you get the best of both without too many tradeoffs?”