Commercial real estate and the office market have undergone tremendous change in the last few years, thanks in large part to the influence of the millennial generation on the way we look at the workplace. From urban locations to amenity-rich spaces, the modern office caters to their preference for a more social, collaborative, and flexible environment. Beyond that, today’s workforce includes a wider range of options than ever before. Mobile technology allows us to work remotely (like I am now!), and we can collaborate with partners and colleagues in the next room or on the next continent –no desk required. People in consulting roles, as well as entrepreneurs who are just getting started can take advantage of this, but they often crave the structure and social stimulation that comes with spending each day in the workplace with others.
These individuals are generally in no position to lease office space- nor are they inclined to take on the multi-year obligation that involves. Enter co-working, an elegant solution that’s been building steam. It’s estimated that there are now more than 2000 co-working sites worldwide, and it’s attracting people from a broad range of occupations.
It should also be noted that it’s not uncommon to see 30, 40, 50 or more people in a company using co-working space. Whether they’re in it for the perks and amenities or simply enjoy the camaraderie, networking and relationship building the co-working offers, it’s not just for the single-practitioner anymore.
So, just what is co-working? Its definition keeps developing, but at the moment the definition developed by a scholar in Vienna covers it nicely:
“Every workspace with flexible structures that is designed for and by people with atypical, new types of work – that is not exclusively for people from one certain company.”
In a co-working space, people from different companies share space and facilities. They work independently and often have the option of leasing the space hourly, daily, weekly, or monthly. This gives them great flexibility and lets them only pay for space they actually need. A young startup may involve 3 people who work closely together. By co-working, they can collaborate, develop, and grow without the expense and commitment of a conventional commercial lease.
As their popularity grows, co-working spaces are offering lots of options, including private suites for small companies looking to establish their identity and culture as well as the more familiar workstation. Many of these spaces work to attract tenants by providing the perks and amenities that any desirable workplace includes these days: coffee bars, bike rooms, and comfortable spaces for interacting with your fellow co-workers. An urban location can be counted with these amenities as well: the huge shift in the desirability of centrally located space makes co-working offices in the city center a hot item. A study from Rutgers places this shift on the doorstep of the millennial generation:
“Now in their twenties and early thirties, they are a tech-savvy collaborative generation wanting to live in higher-density, non suburban activity environments and do not, in general, find suburban employment and one-dimensional insular office campuses particularly attractive.”
All of this is having a big impact on everyone in CRE – agents, owners, and prospective tenants. It’s allowing smaller, younger companies to offer employees a workplace that’s in line with their desires: cool urban spaces, topnotch technology, and a stimulating, collaborative atmosphere.
From the CRE viewpoint, here are a few effects of the co-working trend that are worth considering.
The cycle is speeding up
Many companies are not interested in getting tied up in a long-term lease that often also includes several months for build-out. The office market will need to provide options that accommodate this, and the rapid but hard-to-predict growth of these operations.
Bland and all-purpose won’t cut it
Vanilla build-outs intended to suit Any Company USA are (thankfully) a thing of the past. Businesses are looking for well-designed spaces that will help them to attract and retain top talent. Co-workers look for attractive design, open floor plans, and workplace amenities.
The purpose of the office is shifting
Rather than serving as a central meeting space where work is done daily, many offices function as hubs for collaboration between colleagues who may do much of their work elsewhere. Co-workers can use the Cloud to connect and collaborate, but the workplace is where direct interaction takes place that often fires up innovation and creativity.
Co-working is changing workplace expectations for a whole generation, and those will determine what the office market will look like going forward. What will be next? WeWork, one of the dominant co-working companies in the country, believes we’ll live, work and play in the building. Whether or not this extreme is on the horizon remains to be seen, but we’re certainly pointed in that direction.