One of the hottest businesses to have emerged as a result of the COVID-19 pandemic is the coworking space. This is because a coworking space, as a prime example of flexible office space, allows companies to adapt to the situation, continue to be operational, and expect their employees to still be productive despite not having an office to call their own.
For property owners, a coworking space offers the opportunity to bring in and retain tenants, providing a stable source of revenue.
The Emergence of the Coworking Space
We need to make it clear, though, that the coworking space business is not something that the pandemic birthed as it has been around since 2002. That year, a couple of Austrians established the “Schraubenfabrik” or entrepreneurial center inside an old factory in Vienna.
It’s no wonder then why coworking spaces are being opened left and right.
The space catered to entrepreneurs, architects, freelancers, startups, and PR consultants, providing them a space to work away from home and collaborate. It was not officially known as a coworking space, but it was pointing in the right direction.
Three years later, Brad Neuberg, a machine software engineer, opened the San Francisco Coworking Space, the first-ever official coworking space, at the Spiral Muse in Mission District, San Francisco, California in the United States.
There was no looking back for the business after that, as the number of coworking spaces and clients doubled every year until 2013. By then, more than 100,000 people were working from 3,000 coworking spaces across the globe.
Today, the United States boasts the highest number of coworking spaces in the world at more than 3,762. India is second with 2,197, while the United Kingdom is third with 1,044. By 2024, it is forecasted that the number of individuals working from coworking spaces will reach around 5 million.
Suffice it to say that the coworking business is very much alive and well, even before the pandemic hit. When COVID-19 ravaged most of the world, it upended our normal way of life and forced most companies to rethink their strategy to be able to continue their operations even when most, if not all of their employees were forced to stay home.
Thus, the work-from-home setup became the norm, underlying one thing that a lot of employees have known all along: Workers can still be productive even away from the office.
And now, with the pandemic becoming lesser of a concern for a lot of countries, and with new companies sprouting all over the world, the question of whether to have a physical office or not has become a moot point since a coworking space seems to be the ready-made solution for them, with all its advantages and benefits.
If you have the space or the property and are looking to start your own business, why not try opening a coworking space? This article will help you get started.
How do you create a coworking space?
If you’ve got the space or the property to open one up, then you are already one step ahead in your coworking space business. However, there’s still work to be done.
You would need to think things through before you take the plunge. Here are some of the most important things to consider:
Value proposition and business model
Think about your value proposition and business model. What kind of product or solution are you offering your target market? Who exactly is your target market and why are you in the best position to deliver on your promise? Making sure you have the answers to these questions will help you establish your plan of action that will guide you in setting up a successful coworking space.
Know the competition. Do your due diligence in researching your competition—direct and indirect. Does the location for your coworking space already have several establishments offering the same service? Are there coffee shops and offices nearby? What do they offer?
This will help you determine how your coworking office will stand out as well as the pricing for the services you will offer. It could be higher than most but only if you have something more premium than them. It could also be lower, but you would have to make sure that your business will still be profitable.
Ensure that your location is best for your purpose. You may have a great building, with all the amenities that a nice coworking space offers, but if it’s too far away from commercial establishments, hard to reach (no nearby public transportation system or there’s always horrendous traffic), or there’s some serious safety and security issue, then it most likely won’t be appealing to your target customers.
Make the business as flexible as possible. Don’t settle for one or two specific target customers (e.g. freelancers, entrepreneurs, etc.). That will limit your business. Remember that one of the reasons why coworking spaces have become such a hit is because they cater to the different needs of individuals and organizations. If you have more services to sell, you will have more types of customers that will go your way.
Offer extras. Additional amenities such as a gym, a shower room, or a game room can help your coworking space stand out from the competition. What’s even better about this is you can charge extra for these offerings and clients usually won’t mind because they know that they are getting something more special that will be beneficial to them.
Connect and network. Even before you open your coworking space for the very first time, make sure you already have started a community that will most likely avail of your services. Host meetups and gather people in your place to present to them what you are building. And don’t forget to get their email addresses and other contact details so that you can do follow-ups and send additional information that can help convince them that what you offer is worth it.
Focus on functionality and aesthetics. Make sure your coworking space has all the amenities and features that you have promised, and then some. It should be what is advertised with a few extras that serve as a pleasant surprise to your clients.
Furniture should be comfortable, the ambiance warm and conducive to productive work, and the whole place pleasant and inviting to make people want to spend their work hours there. So don’t scrimp on the budget for these.
If you’re a property owner who’s interested in creating your own coworking space but don’t know where to start, you can form a partnership with a coworking company like Weremote. Through Weremote’s business model, landlords can not only attract and retain tenants but also maximize the value of their assets and enhance their property portfolio.
Why Entrepreneurs and Small Businesses Go for Coworking Spaces
With the proliferation of coworking spaces and the services and amenities they offer, entrepreneurs putting up their business for the first time are more likely to lease space rather than buy a property and set up their office there, even if they have enough funds for it. This is because coworking spaces function as a traditional office but without the usual overhead.
A rental fee in a coworking space already covers every basic necessity of a fully functional office such as internet, electricity, air conditioning, telephony, and even housekeeping and coffee. In a traditional office, you would have to pay for each of these on top of other expenses.
Also, there should be someone in charge of this, otherwise, there could be a missed payment that could lead to a disruption of service. For this reason alone, a coworking space becomes a much more attractive option.
Coworking spaces also offer different packages to suit the needs of the client. If they need to conduct their business for just a week at a particular location, then they can opt for such an arrangement.
If they get bigger, then they can upgrade their contract to cover the need for more space. Such flexibility allows these entrepreneurs and small businesses to ensure that they won’t be wasting valuable resources, especially at this point when they are still in the process of becoming stable.
As more and more small businesses open up in this period when it seems we have gotten past the worst of the pandemic, we can be sure that more coworking spaces will be needed to cater to their needs.
Why the Coworking Space Is a Boon for the Real Estate Industry
With coworking spaces becoming the choice for more and more startups and entrepreneurs and even established companies looking to expand their business beyond their current location, the need for actual spaces to house them rises as well. It could be a whole building, an entire floor of a building, or just a few units in a condominium.
This in turn has reenergized the real estate industry. Whereas before, commercial real estate can only make money from 10-year leases of traditional offices. Today, shorter leases with coworking spaces are bringing more income per square foot to property owners.
Vacant buildings in strategic locations are given life, with landlords offering smaller spaces to startups, ensuring that they would be able to pay rent compared to if they were occupying a bigger space. Should the company expand, that would be beneficial for the property owner as well, as most likely, additional spaces would be needed and therefore rented.
Because of these, an increasing number of real estate investors are making sure to include in their portfolios flexible working spaces, at least 15% to 30% of their building.
The State of the Coworking Industry in the Philippines
In the Philippines, it is projected that by 2030, 30% of commercial real estate would have been allocated to coworking spaces, driven by startups and even multinational corporations as well as the millennial generation.
Millennials, in particular, have been known to prefer the nontraditional way of working, which includes freelancing instead of working full-time. For them, working in a traditional office would mean less freedom, convenience, and flexibility. It’s no surprise therefore that they gravitate toward coworking spaces that offer such features.
Metro Manila remains to be the center of the coworking space industry, and for good reason. According to the 2019 Global Startup Ecosystem Report, the metropolis was among the top 10 global ecosystems when it comes to value for money, something that all startups (and established businesses for that matter) look for when scouting for a possible location for their business.
It also helped that the Innovative Startup Act was also passed by Congress, making it easier for startups to establish themselves and achieve stability because of grants and tax breaks, and, in the case of small companies with foreign employees, looser immigration requirements.
Did we say even established businesses have joined in on the fun? Try multinational corporations (MNCs).
A report from Colliers International revealed that MNCs are renting thousands of coworking desks in Southeast Asia, taking advantage of the flexibility that such an arrangement offers. Because they have shunned the long-term lease agreement, they can transfer their employees easily to handle short-term projects or test new markets. Coworking spaces also served as temporary offices while they were having their regional headquarters constructed.
MNCs also have the option of hiring local staff to manage their offshore operations instead of sending their own employees overseas. This is how business process outsourcing (BPO) and knowledge process outsourcing (KPO) came to be. Generally, the salaries of local workers hired by MNCs are lower compared to those of onshore employees.
5 Reasons Why Coworking Spaces are a Good Business for Landlords and Property Owners
Landlords and property owners can surely cash in on this phenomenon by converting their property to a coworking space through joint ventures, management agreements, or even launching their coworking brands.
Here are five of the main benefits of going into the coworking space business:
Increases the value of the property
According to a recent report from CBRE, the world’s largest commercial and real estate services and investment firm, 40% of buildings that allocate flexible/coworking space are valued higher than traditional office buildings in their market.
One caveat: You still can’t have too much of a good thing. A more flexible workspace means more risk. On the flip side, not enough coworking space means no effect on the property’s value. Experts say 20% to 40% building allocation seems to be the sweet spot.
Attracts other businesses
Coworking spaces mean a regular stream of people going in and out of the building, which is beneficial to other businesses that would cater to such foot traffic. It wouldn’t be a surprise if coffee shops and other commercial businesses soon rent space in the building.
Leads to potential tenants
Most startups, fortunately, go on to become successful businesses, which means they have to expand. So, not only will they require more spaces but, at some point, they would need to have their own offices, which the same building can offer.
Offers more opportunities for revenue generation
Opening up your building space to a coworking space operator can give you the opportunity for a profit-sharing agreement with them so that not only will you earn from the rental but also from the profit they generate.
Improvement of the building’s technology
Most coworking spaces need better technology to operate more efficiently, which usually means improving the place they are occupying. Expenses for such a process can be shared by the landlord and tenant.
To be sure, no one can say what the future of the coworking space would be. While it has proved to be successful ever since it began in 2005 and more so after the height of the pandemic, there are still a lot of factors that can arrest its further growth and development, such as the changing needs of the times. But as has been mentioned, industry insiders believe that at least until 2030, coworking spaces will still be in hot demand, which bodes well for landlords and property owners too.
As long as there are startups and free-spirited entrepreneurs, coworking spaces are here to stay.