Hidden away in one of Berlin’s side streets is the birthplace of the co-working culture that has become an essential part of today’s real estate environment. In 1995, a group of computer engineers set up a shared work environment known as the “hackerspace” in the German capital for hackers to meet and share ideas.
“It offered its members desk space, an internet connection and a community, which is no small thing for bedroom-bound hackers, who collaborate online, but rarely get the chance to meet in person,” Tim Rayner, the author of Hacker Culture and the New Rules of Innovation, wrote of the hackerspace. The hackerspace movement scaled internationally over the next two decades, and simultaneously inspired a generation of entrepreneurs to reconsider their conditions of work, Rayner said.
Today, co-working is a multi-billion-dollar industry and a key driver in the office market.
Ingredients for success
Co-working operators believe a co-working space is more than just a physical space, but also a human system that brings together people with similar needs and interests. Providers should therefore maintain a healthy curiosity about the needs of their members to ensure they anticipate and meet evolving demands. Apart from the provision of essential services such as cleaning, food and beverage and IT support, it is also quite common for co-working spaces to provide event management services and gym facilities.
The flexibility in lease terms and deal structures of co-working spaces are often the key factors that motivate businesses to select such spaces as their operating base. Compared to the three-plus-three year leases typical of traditional offices, lease terms at co-working spaces typically range from several months to six years.
While co-working centres have until recently been the domain of dedicated co-working operators, the success of the segment has attracted the attention of the wider property industry, leading to an increasing number of property owners partnering with operators.
These partnerships usually take the form of a revenue-sharing agreement, under which the landlord is responsible for injecting capital into the joint undertaking, or by providing concessions such as lower rent or reducing upfront payments by the operator. This is not only beneficial to co-working providers, but also landlords who can enjoy higher occupancy rates.
Turning challenges into opportunities
Like so many industries, the co-working space has been hit by the Covid-19 pandemic. Some operators are bracing themselves for consolidation in the market as the imposition of lockdowns and social distancing rules has forced co-working spaces to reduce capacity or shut down completely. In Hong Kong, the widespread adoption of work-from-home policies has adversely affected office occupancy.
But on the other side of the coin, the pandemic has presented the industry with some opportunities. Companies that are experiencing delays in office completion or that have been forced to split operations are increasingly opting for short-term leases in co-working spaces.
In addition, cost-conscious businesses that are actively considering a reduction in office size due to the pandemic may turn to co-working spaces, where costs can be lower than traditional offices, as well as offering more flexibility amid the ongoing uncertainty.
A post-Covid world
What is likely to emerge in the pandemic’s wake is an acceleration in the adoption of remote working. Companies are also increasingly shifting towards a “hub and spoke” type of operation, to facilitate split teams and enable operational agility amid disruption.
We can see from the early stages of the outbreak how co-working spaces offer a useful option. Many employees who became stranded abroad due to sudden border closures and lockdown impositions were able to continue to work because of the widespread availability of these shared office spaces.
Health and hygiene measures will likely become more important for operators. Along with greater awareness of better health and safety standards, co-working providers will need to invest in enhanced health protection for clients and employees, as well as members of the public who have access to the property.
The availability of technologies such as touchless systems could help the co-working sector address the latest demands, although adoption will be easier in the case of new buildings compared to existing ones, due to design constraints.
Co-working providers in general should be able to adjust to whatever “new normal” eventually emerges post-Covid without too much trouble. After all, the notion of co-working was founded on the principle of community, and therefore health measures and the emphasis on human connection should develop naturally, rather than take the form of a forced coexistence that is both fragile and unsustainable.