Coworking

Where it all started and how it's evolved

What is Coworking?

By Matthew Khorsandi - November 26th 2019

How it all started

On August 9th 2005, software engineer Brad Neuberg ignited one of the world’s most disruptive industries with a single blog post titled, “Coworking - Community for Developers Who Work From Home”. Neuberg’s post was a battle cry for “free spirits” and creators to come and work together in community at the Spiral Muse Coworking Group, “sitting at tables or relaxing on couches”. 

To this day he is asked “did you create coworking?” to which Neuberg responds, “yes, I created coworking”. 

A coworking community gathering in Pasadena, CA

The evolution of coworking

Coworking has become so much more than just an idea in a software engineer’s mind. The perceived concept worldwide around coworking has taken on many shapes, but at the heart of it all, we cannot forget the essence of what coworking truly is. In this post, we seek to reinforce the true spirit of what coworking is and is not, as well as where we think it’s heading. 

With more than 40% of large businesses investing in flexible office space and 14% of their workforce working from these spaces, there’s no doubt that big money has caught on. 

Milton Friedman argued that “the sole purpose of a business is to generate profits for its shareholders.” However, it’s hard to say if the most basic premise of coworking as conceptualized by Neuberg was an actual true and sustainable business model. The chord he struck and the universal truth that sparked this burgeoning revolution was primarily centered on a sense of community working from relaxed office environments. 

This trail Neuberg blazed drove intense speculation in the subsequent months. This simple idea of enjoying who you work with and where you work from, has left many entrepreneurs and investors pondering how to make a business out of it. 

With all the excitement and pent up demand to change the way we work, capital began flowing into the concept of coworking. A byproduct of this intense speculation has been the impetus for investors racing to put their proverbial stakes in the ground. One such example of this is The We Company. In the words of WeWork’s former CEO Adam Neumann as he described his coworking company, “WE do not live in a world that makes sense; WE (the company) does not live in a world that makes sense”. 

So we ask, how was the business world to make sense of this industry when WeWork raised record amounts of money, leasing over 1 million ft² of office space per month, all predicated on Neuberg’s novel concept of coworking? 

In this Ready, Fire, Aim approach of the past, it’s true that many of the fundamental tenets of business have been largely overlooked by early founders in the coworking sector. We are now seeing a settling of the dust around the incredibly exciting and demand driven business of coworking. Strong and experienced business leadership is now taking the place of many of these early founders and the industry at large is beginning to mature. The press and media have enjoyed much attention in reporting on the day to day evolution of the coworking business.

Coworking by the numbers

With over fourteen thousand coworking spaces globally, this disruptive force in commercial real estate has many wondering, what is the future of coworking? Here are some quick stats to show the impact that coworking has had on the commercial real estate industry.

  • There are currently over 35,000 coworking spaces in the world today
  • Coworking accounts for over 521 million ft² of flexible office space
  • The shared workspace industry has grown 200% since 2014
  • In 2018, 2,188 new coworking businesses opened globally with 1,000 in the U.S. alone
  • 40% of flexible workspace demand is forecasted to come from large and corporate companies

Source - AllWork.space

According to JLL, companies of all sizes have realized the potential benefits of leveraging flexible space arrangements to better manage their liquid workforce and short-term space needs. Strong brand awareness, aggressive adoption and forecasts of widespread future use will continue to drive the flexible space sector forward for years to come. Although that pace of expansion may slow, buyer expectations have been reset in a way that will fundamentally change the way space is delivered and consumed.

Our thoughts...

In this post, we plan to identify the differentiating factors of a successful coworking space as well as make a prediction as to where the industry is heading.  

The global workforce is fluid and coworking is the response to a shift in the way the world’s leaders and most innovative people think, work, create, and choose to live.

A traditional office lease is laborious, time consuming, capital intensive, rigid and ultimately unresponsive to changing business needs.

Many could argue that few have ever experienced a moment of inspiration in a traditional office tower. When was the last time you heard of a famous artist, musician, or thought leader develop their prized creations on the 34th floor of the nearest Class A office building? We all know, this just doesn’t happen. 

Traditional office buildings are a constant reminder and symbol of all that the workforce seeks to escape. Long hours, working for the man, cubicles, no sense of ownership or pride, boring, lackluster and downright uncomfortable are just a few of the words invoked when thinking of traditional office space. Few will say it, but there are universal truths to the aforementioned descriptors of office space and Neuberg’s original thought of coworking was artful in that he gave us all a new way of looking at the concept of work environments and work culture.

Large and small companies, entrepreneurs, creatives, and freelancers alike crave a free-flowing, non-restrictive atmosphere where they can ideate and innovate amongst others.

Coworking demand continues to grow rapidly across the globe, but supply is starting to catch up. Flexible office providers with undifferentiated and commoditized products will struggle, while experienced operators continue to take off. This means for a coworking business to flourish, sustain and grow, a delicate balance of passion, culture, community and sound business principles must merge. 

Best practices for operators

Coworking spaces have to provide more than just some nice furniture, high speed internet, plants, coffee, kombucha and beer on tap. Successful coworking spaces provide a curated lifestyle experience that speaks to the demographic it serves. Curated mixers, speaker series, classes, positivity, activations and celebrations that enrich the community are essential. The best coworking operators create and nurture an atmosphere where members work, play, meet, network, and socialize to ultimately grow their businesses. These are tailored spaces, services, amenities and programs that spark inspiration through the entire workspace experience. The HAAS (headquarters as a service) and SAAS (space as a service) models are proving to drive talent acquisition and retention with 85% of people based in coworking spaces reporting a greater sense of motivation on the job.

Best in class coworking spaces create a unique atmosphere – one that’s distinctive, cosmopolitan and understated – not only to delight the senses, but also to inspire and sustain creativity, collaboration and interaction amongst members.

Savvy coworking operators design their facilities to be a reflection of the surrounding environment and community. They are a purpose built extension of the local culture, rather than an imposition on it. With thoughtfully crafted spaces that encourage members to work, play, meet and fully experience the joys and passion of being an entrepreneur, we believe coworking is here to stay.

The best coworking providers in the industry put members first by truly listening to and nurturing their business needs. They’re gracious, relaxed and anticipatory, with technology, services, and a familial atmosphere as cornerstones of their service model. Strong coworking spaces create a culture of diverse and welcoming entrepreneurs, enterprises, small businesses and progressive thinkers.

Communities that are thoughtfully considered and curated to reflect a dynamic mix of creative, cultural and professional backgrounds will succeed most. Diversity, communal bonds, unique atmospheres, and other intangibles are what meld together to create a special vibe that’s exclusive, but not pretentious – relaxed, yet sophisticated – fun, yet challenging. Community cannot be overlooked and its soul should not be lost in the workplace.

Conclusion

Irrespective of some operators’ path forward, the future of commercial office space will retain many of the key elements that helped fuel this disruption. Space will be fast, flexible and fun. Pre-built spaces, agile design, technology integration, flexible lease terms, hospitality service and even comfy couches will become the norm and continue to transform commercial real estate from a commodity to a mainstay consumer product.

CTRL Collective is a coworking and shared experiential workspace for creative entrepreneurs in tech, design, film, fashion, branding, architecture, the arts, and all other professions.  Our members forge a vibrant community of creatives and innovators, working collaboratively under one roof. 

- Matt Khorsandi

Director of Real Estate - CTRL Collective

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