- Who We Serve
Despite the public struggles and subsequent bankruptcy of WeWork, the future of shared workspace has continued to evolve. WeWork, which once represented the vision of co-working offices that bring together freelancers, remote workers, and small office communities, has faced challenges from both internal disorganization and the rise of remote work amid the COVID-19 pandemic. However, the company’s unique troubles do not mean the industry is obsolete, and co-working spaces have continued to adapt to meet shifting demand.
Let’s take a closer look at everything you need to know about the opportunities and challenges presented by the co-working space, from a rise in exclusive clubs to ongoing leasing concerns in the office space sector:
The Evolution of the Shared Workspace Space Industry
The rise of shared workspace began in the mid-2000s, with companies like WeWork looking to tap into the market of millennials embracing freelance work and start-up culture. Once the largest private office tenant in New York City, WeWork had a high-profile unraveling that involved damage to investors, revolving leadership, and other internal disarray. In November, the company filed for bankruptcy amid a restructuring plan that involved dramatically reducing a portfolio of office leases. Now, other flexible workspace providers are looking to take over the co-working space market, signaling a shift in the industry.
Competitors are already looking to swoop in on WeWork’s abandoned leases, but the nonoperational locations may offer limited opportunities. Even for the buildings with the capital structure to recover from WeWork’s bankruptcy, new buyers will need to come in with a new financial slate, and a major redesign and repositioning will likely be necessary for the building to be successful. The majority of WeWork leases are on Class B and Class C office buildings that operate on long-term leases and lack the amenities required to draw remote workers back to the office.
Entrepreneurial new co-working businesses have looked to change how leasing models function for flexible office spaces. For example, Codi, a newer co-working space company, adapted WeWork’s model, so instead of signing long-term leases and subleasing those spaces, the company works out a revenue-sharing program. The company aims to work more with businesses “graduating'' from coworking space and looking for turnkey offices. For owners looking to lease out unused office space, working within these alternative leasing structures may be a way to draw occupants.
As workers continue to enjoy the remote-work trend, shared workspaces have experienced a similar evolution to Class A office space, with amenity-rich, multi-use spaces winning out in the market. Workers’ preference for the office to be a destination spot, rather than somewhere you have to go, has driven the dominant trend toward exclusive co-working clubs.
The Rise of Exclusive Co-Working Clubs
The most significant trend in flexible working spaces is private co-working clubs, which are more expensive and exclusive than original co-working models. Private work clubs provide an upscale lifestyle experience that addresses member's work, social, and wellness needs. Similar to the popularity of Class A office space with lifestyle amenities, the model is meant to draw in workers who are otherwise inclined to stay at home. Exclusive shared workspace clubs offer employees a third place to cultivate a social sphere outside of the home and office through curated hospitality, lifestyle, and wellness amenities, as well as access to cultural or career-building events.
For example, Neuehouse in New York and Los Angeles offer a coworking space that leads with hospitality experiences, creating a combination of work and social space for city creatives. The spaces feature a bar and cafe, as well as a highly-curated design with sound-dampening seating. Members are also given access to a roster of events and exhibits, emphasizing how the space is meant to draw and inspire as a means of bridging the office occupancy gap. Bian, a private social club in Chicago, offers workspace alongside a broad array of wellness programming including fitness classes, spa services, nutrition consultants, and a medical concierge. Lifestyle-driven amenities have become a focus among workers looking for a more holistic approach to work-life balance, and are also a strategy for boosting demand.
Exclusive co-working clubs may be on the rise, but a high-cost point and exclusivity have not been a universal success. High-profile coworking space The Wing shuttered in 2022, citing the COVID-19 pandemic and global economic uncertainty as a leading factor in the company’s failure. The shared workspace business, which drew in members with Instagram-worthy design and a roster of high-profile cultural events, received funding from WeWork. When WeWork sold its stake in 2019, the organization struggled, and its financial woes were compounded by the pandemic’s closing of doors. Businesses operating in a post-pandemic environment may be operating under better conditions and with higher demand, but macroeconomic challenges should always be a consideration.
Emerging Opportunities & Ongoing Challenges in Shared Workspace
In order to diversify assets and mitigate risk, many developers are opting to add shared workspace and co-workig clubs to existing mixed-use developments. For example, The Park, a former office complex repurposed into a mixed-use community hub, added a working club called Round Table Studios to its property. The space is available to both office users and residents, giving members flexible workspaces, event space, exclusive membership at restaurants and bars, and access to wellness programming. Round Table Studios boasts a 92% occupancy level, signifying the strength of investing in spaces with luxury amenities and mixed-use development environments.
On the other hand, Class B and Class C co-working spaces are still facing the same perils as traditional office buildings, as demand remains low in the remote work era. Exclusive co-working clubs that have seen success are largely in job-rich, metropolitan areas where demand is higher. Before investing in a shared workspace asset class or considering including coworking space as part of a mixed-use development project, it’s important to do proper market research to assess demand.
How Technology Can Help Weigh Shared Workspace Opportunities
Even though the co-working space market may present opportunities, it’s always wise to conduct proper research and due diligence to ensure projects will be a success. Budget forecasting to ensure an investment will deliver proper ROI is especially vital for an asset class in a state of transition. Modern real estate development software can help you digitize this process and ensure more predictable outcomes on your projects.
Northspyre’s purpose-built, single software solution acts as your command center, starting in early project planning. The platform’s DeepLook feature leverages data gathered from $175 billion dollars' worth of projects to tell you what projects should cost based on project location, asset class, and other factors. Northspyre is designed to inform you of opportunities to save money and eliminate overspending, notifying you about potential exposures and remaining contingencies to ensure your project comes in on time and on budget.
Download our white paper A Guide to Overcoming Real Estate Development’s Greatest Obstacles for more strategies to achieve predictable and profitable outcomes on your complex development projects.
Tag(s): Real Estate Technology
Other posts you might be interested inView All Posts
October 13, 2021
Is Life Science a Secret Boon for Office Real Estate Development?Continue Reading
May 27, 2021
2021 Construction Trends Signal Good News for CRE DevelopersContinue Reading
January 6, 2022
Real Estate Development