Tanya Aggarwal 23rd Jun 2020
Will the second- and third-order effects of a near-global lockdown change how we perceive workspaces? What would that world look like and how does that impact a CEO’s decision to lease a space today? To understand some of these questions, this week, A-scale examines an industry that burst onto the scene, crashed commercial retail’s party, and asked similar questions not too long ago: Coworking.
COVID-19 and the coworking industry
What is happening globally?
COVID-19 has forced most companies to implement work from home (WFH) regimes that serve to threaten coworking spaces across the globe in the short term. 72 percent of spaces said they have witnessed a significant drop in the number of people working from their space since the outbreak, based on a survey of over 14,000 coworking spaces across 172 countries worldwide by Coworker.
Concurrently, 41 percent of coworking spaces reported a negative impact on membership and contract renewals since the outbreak, and 67 percent of spaces have experienced a drop in the number of new membership enquiries.
Coworker reported in late March that the top consequences co-working spaces are experiencing are:
- Event cancellations (71.04 percent)
- Meeting/conference room cancellations (65.99 percent)
- Membership cancellations (34.68 percent)
- Changing the behaviour of members (24.2 percent)
- Space closure (20.2 percent)
- Sick members (8.75 percent)
In the UK, Plexal, one of Europe’s larger coworking spaces, has seen 70 of their 123 member companies urgently needing access to grant funding to cope with disruptions caused by COVID-19.
The total market for flexible or coworking spaces was expected to grow from 30 million square feet to more than 40 million square feet in 2020 in India across the top 10 cities this year. COVID-19 has, however, not only forced many coworking firms to alter growth plans, but also to renegotiate rentals in the wake of lockdowns across the country.
Clients won’t be able to pay rent on time and many have asked for concessions. With member health put into question, these firms need to re-imagine their position. But the one thing we’ve learnt from last year is that co-working spaces are resilient and even a pandemic cannot cause their downfall.
Post COVID-19 opportunities Flexible rent As paying rent for office spaces that cannot be utilised during state-imposed lockdowns is causing companies to bleed further. Businesses, especially SMEs, are renegotiating or cancelling leases through force majeure provisions. Moving ahead, businesses will still require office spaces, but will prefer cheaper and more flexible arrangements.
De-densification of offices Once COVID-19 panic abates, larger companies may also look to de-densify their offices as a response to
(1) increased demand for remote working arrangements and
(2) residual risk of community spread from asymptomatic carriers of COVID-19. This presents an opportunity to coworking spaces as they can offer such companies professional office amenities, spaces for small- to medium-sized teams, and cleaning services all included in their fees. In India, as things stand, offices are designed to maintain 60–80 sq ft per person.
This means that an office of 10,000 sq ft currently accommodates around 166 people. With COVID-19 making social distancing the new norm, office spaces will have to be re-calibrated to maintain a minimum gap of 6 ft among employees. That typical 10,000 sq ft office will now be suitable for 100 people only.
Companies that require coordination between various teams may opt to take additional space in coworking offices nearby, instead of getting the teams to report to work simultaneously. Sign up for Newsletters Check out our popular newsletters and subscribe Rapid growth in the gig economy Long before COVID-19 struck, the gig economy was already experiencing rapid growth.
It was projected to grow at 17 percent CAGR and generate a gross volume of roughly $455 billion by 2023. Moreover, India is also the 5th largest country for flexible staffing across the world. With the gig economy already moving in an upwards trajectory, freelancers such as consultants and graphic designers have always turned to coworking spaces in search of more professional and well-equipped workspaces than their own homes.
As COVID-19 leads to an increase in unemployment and as companies turn to freelance and part-time staff in favour of full-time ones, we may witness an increase in demand for flexible working spaces. Not only do coworking spaces present a more professional working environment, but also the opportunity for freelancers to meet new clients within the community. Rise in online education Online classes are on the rise, with schools and universities being shut down worldwide.
This, however, presents a lucrative opportunity for coworking spaces. As any student will tell you, the ‘environment’ of education is key to determining the educational outcomes. Home and dormitories, being casual, become sub-optimal choices, as compared to coworking spaces. Remote learning experiences can be provided to interested students, via partnerships with schools and universities, and by offering students memberships at subsidised rates.
Who knows, the schools of tomorrow may well be decentralised, with the present being the point of inflexion in that revolution. Also Read How COVID-19 is transforming the education sector in India Revenge Working Have you heard of revenge spending?
Meet revenge working. Lockdowns and state-imposed shutdowns of companies have caused significant economic damage and many industries do not have the luxury of being able to work from home effectively. Industries across the board are gearing up to get back to work and pick up the pace the moment lockdowns are lifted. To resuscitate the economy, some business leaders even believe that Indians should work for 60 hours a week. We posit that when people get back to work, they’ll be hungrier and more motivated to make up for the lost time — at least in the immediate term.
Thus, coworking spaces that plan and prepare for members spending longer hours stand to gain. But what can coworking spaces do today to ride out this Pandemic? We take a look at some of the best practices by large players in the market. It is clear that social distancing and lockdowns have become an existential threat to coworking spaces, many of which have now turned digital to sustain their communities.
Yet, the industry also faces a myriad of opportunities once the crisis abates. Having weighed up the threats and opportunities, let’s take a closer look at what we think the future of coworking might look like. Looking Ahead The coworking business model is a unique mixture of real estate and experiences.
After the pandemic, both aspects of the business model will see some changes. Real Estate Lease arrangements The coworking model came under criticism last year due to an inefficiency in the lease arrangements where companies were taking long-term leases from their landlords and giving out short-term leases to their tenants. Having seen a loss of revenue almost overnight during COVID-19, coworking spaces will be more cautious with their lease arrangements. This may include negotiations for alternate lease arrangements such as revenue share models or shorter lease terms.
Private office spaces COVID-19 has inadvertently functioned as a giant work-from-home experiment. With social distancing now hard-wired in our brains, coworking spaces may optimise their floor layouts to mimic it in their offices, while simultaneously balancing it with community interaction. Further, large companies seeking to trim operations may opt for more flexible arrangements, leading to a potential rise in private-office spaces or open-close office spaces.
These office spaces would be large enough to accommodate small- to medium-sized teams, yet affording teams the opportunity for community interaction with others. Alongside private office-spaces, we may also see an increase in private cubicles, as freelancers and ‘hometrepreneurs’ recognise the limitations of working from home and the benefits of office amenities.
Small houses tend not to lend themselves to a productive work-from-home culture (the average household size in India is 900–1,200 square feet). We posit that freelancers will be driven to coworking spaces, which provide access to a greater amount of space as well as private cubicles for privacy if desired. Rise of corporate and private coworking spaces Corporate real estate companies may find their properties under-utilised post the pandemic.
With the demand in coworking spaces increasing, these companies will look to enter this market by creating bespoke, niche, and standalone coworking space outlets to efficiently manage their unused inventory. This would provide an opportunity for the current coworking spaces to find partnership opportunities with these corporations.
Experiences Heightened sanitation and touch-free experiences Consumer behaviour is changing to a more cautious approach, with heightened sanitation and touch-free experiences atop the hierarchy of needs, and handwashing and mask-wearing being imbibed into our values. As such, we anticipate the increased frequency of surface disinfection and cleaning in coworking spaces to remain, opening avenues for coworking spaces and technology startups to design and implement a full suite of contactless experiences, from visitor management systems like Zerone’s contactless visitor management systems to social-distancing breakout sessions.
No more frills With both investor confidence and cash reserves low in this industry post-COVID-19, coworking spaces will have to take a more no-frills-approach towards their services. These spaces will have to let go of some free events and services, and would instead have to explore more efficient ways to leverage their community to maintain brand loyalty and create inelasticity.
Specialty value-added services With the surge in revenge working, coworking spaces will see a demand in speciality value-add services. These include basic professional office amenities like access to meeting rooms, mailing addresses and answering services. Apart from the basic professional services, demand for new services like mental health services would also crop up with people working all these extra hours.
Coworking spaces would need to cater to this demand by providing services like meditation sessions and para-counselling training for staff. Online community experience A major and rather latent aspect of every coworking space is the ‘community’ experience. Having been dealt a COVID-19 blow, these coworking spaces have had to make efforts to replicate this offline community online.
Even when the coronavirus pandemic starts to abate, mainstream society will not return to normalcy at once. There will be an initial ‘test the waters’ phase, which will last for varying periods, based on each individual. Therefore, to ensure loyalty, coworking spaces will have to set, but more importantly, maintain the bar of their online experiences high. COVID-19 as such has upended the traditional meaning of “work”. During this time, we can no longer enjoy watercooler chats or the luxury of face-to-face meetings. Instead, we grapple with Zoom calls, and define for ourselves new concepts of “work” entirely.
Coworking spaces have been, and will continue to be, significantly hurt by lockdowns and social distancing requirements, but several opportunities for the industry lie at the end of the proverbial tunnel. This may truly be a time to sink or swim, and coworking spaces that can be early adopters will truly have the opportunity to shine and become the future of workplaces.
Read more at: https://yourstory.com/2020/06/coworking-covid-19-lockdown-work-culture-office-space