Sharing work spaces, also known as “co-working”, has become increasingly popular in recent years.
Coworking has grown alongside the start-up boom particularly in the tech sector. The coworking business structure has a few main features. Operators of these spaces assemble different businesses, rental offices and shared work space on a floor. The coworking company gives flexible lease terms allowing users to move in/move out and make changes in short times. Lastly the coworking company will foster a sense of community in its tenants through events and community building.
The coworking model can prove difficult to organize and operate however. The coworking company must pay for a lease for a period of time and then try to make a profit on top of that by letting out their space to the coworking tenants. With high fixed costs and the responsibility of providing flexibility and services to its clients, it’s a tough model to generate revenue in. To combat the unpredictable revenue stream, coworking companies have targeted specific sectors of people to reduce variability. For instance putting only writers in a certain space or designers from different companies together. The rationale here is that people from similar industries will have a tendency to want to stay together once they’ve formed a network and this will provide stability in terms of rents. Another argument would be for these coworking companies to diversify their clients across different segments, offering space to mature companies as well as startups and individuals. Even bigger companies are using the coworking model to increase communication and cohesion amongst their employees in certain divisions by sharing a space and not being “walled off” so to speak.
More and more players are entering the coworking market, although the biggest coworking company is Wework. Some of the smaller companies are letting their clients use different locations as part of the package so they have greater mobility. Coworking companies are also taking on more and more large spaces to give them leverage with building owners in terms of lease rates as well as an ability to tackle larger clients. As the coworking trend becomes more competitive, the best way for these companies to differentiate themselves is to offer better services, amenities, and events. As the coworking trend continues, companies are even bringing in coworking companies into their own spaces to help organize and manage their employees effectively. Only the future will tell how effective this model will continue to be and how many people will choose to adopt it.