In light of the significant changes we’ve seen in the flexible workspace market we thought it appropriate to take a look at Corporate Coworking. From its origins to the driving forces behind the move to a coworking environment, keep reading to understand why you need to factor in corporates to your shared workspace or Coworking business plan.
In this article:
The Origins: From Corporate to Coworking
In recent years, we have seen a shift in enterprise mindset and increased desire to integrate large teams into a more open and collaborative environment. With an eye on attracting fresh talent, reducing overhead expenses, offering more amenities, stimulating networking opportunities, and delivering a better work experience, among other reasons, corporate organisations have begun jumping on the Coworking bandwagon. However, according to the GWA Industry Financial Survey conducted earlier this year, only 12% of Coworking users are corporate mobile workers. We can expect that number to rise over the coming years.
We’ve seen significant milestones this year that indicate a climbing tendency towards shared and Coworking office uptake by corporates. For starters, one of the first and largest Corporate and Coworking marriages was between IBM and WeWork. In April of this year, IBM agreed to move 600 corporate employees to a new 70,000 square feet ten story building in the heart of Greenwich Village, a property designed and managed by WeWork. It’s a bold step for WeWork who – now at $9.85 billion valuation – are having their hand at a new target market of large-scale enterprise customers in addition to the long-established startup and entrepreneur clientele.
Following this, real estate giants Blackstone went full-speed ahead into the flexible workspace market acquiring the UK’s The Office Group for £500 million and the Carlyle Group. Following this, real estate giants Blackstone went full-speed ahead into the flexible workspace market acquiring the made a £150 million investment in the Uncommon workspace brand. When property asset holders team up with companies who have proven a profitable and functional shared workspace model, the sky is the limit.
Corporate Coworking: Shift to Mainstream
The accessibility to assets and property combined with enterprise demand for flexibility and space delivered as a service leaves the door to a new gamut of providers and an evolving market of occupiers seeking a new type of space. In 2016, under 1% of office space in the US was flexible or shared space. Based on data from research initiatives by Deskmag and Emergent Research, that amount of office space is projected to increase to around 2% by 2020, and potentially up to 5% over the next five years.
Because of these data-inspired projections, rising demand for flexible space and the rapid growth in the number of operators, we can anticipate the tipping point for corporate Coworking to arrive sooner rather than later. Operators such as WeWork and Knotel are facilitating space-as-a-service for large and enterprise customers, from build out to white-label branding, making the transition from traditional lease to flexible space that much easier. There isn’t much data on exactly how many corporate companies will move into flexible space, as these numbers will depend on existing leases, internal organisation and space availability. However, we can expect a domino effect in the transition of large to enterprise sized companies moving to Coworking spaces. It may creep up on us, so it’s best to be prepared.
Impetus behind Corporate Coworking
The Corporate movement to a shared office scenario is an indication that the way in which people work continues to evolve. Companies can decide to offer flexibility around where people work just so long as the work gets done. Large organisations such as Dell, Zapier, Aetna, Edgar, ADP, and InVision are among the many that have maintained a mostly remote workforce; perhaps to cut back on transport costs, lost time in commuting or to accommodate family-focused lifestyles. Now, however, there has been a push to bring people back into the office. But not just any traditional facility with enclosed cubicles and an office manager.
The Coworking or shared space option makes it easier for corporates to transition to a new workspace environment that aligns to both their budget and workplace strategy. Reducing their physical footprint, lowering overhead and lease costs, and offering a more attractive work atmosphere to their employees is front and centre. Since the explosion of startups and VC funded companies, longstanding corporations, and enterprise companies have slowly realised that workplace environment, amenities and location play a vital role in attracting and retaining fresh talent. Workplace strategy is now an essential part of business planning and management.
So where does this now leave Operators and CRE investors? We believe it offers greater opportunity to bring larger organisations to your workspace, which also brings a slew of benefits. But we’ll get to that later. For now, we’ve put together a guide for attracting corporate Coworking users. Here are the fundamental pillars you should focus on when considering a corporate Coworking plan in your workspace.
Attracting Corporate Users to your Coworking Space
In many cities across the world, the standard business district office space, previously destined for enterprise or corporate organisations, may now be too expensive or, in some cases, outdated and unfit to attract new tenants or investors. Under-utilized buildings, warehouse spaces and outlying neighbourhoods are being gentrified and turned into hip alluring new business hubs. There is a vast opportunity for small but ambitious operators who want to grow their brand to adopt space in these areas and contribute to the growth and transition of the neighbourhood itself. By offering businesses the opportunity to bring a brand name to a new and up-and-coming area will add value to your proposition.
In the face of public transportation malfunctions, delays or strikes, high mileage costs and time lost commuting, corporations welcome an office space outside of urban areas where both public transportation and parking are easily accessible. These urban fringe zones are becoming increasingly popular among those who commute from the countryside. Being next to transfer hubs, train stations or bus terminals is a determining factor that will help generate more corporate traffic to your space. Of course, space providers must consider both the accessibility of their office to clients and partner organisations as well as the proximity to external amenities such as stores, restaurants, coffee shops (if you don’t have your own) and gyms. Your location should meet all of the day-to-day needs of workers previously in cities or local communities as well as facilitate the business needs of occupants.
Being centrally located or at the least close to urban areas is convenient to clients and partner organisations.
The move towards flexible space among corporates is primarily motivated by the push to reduce their physical footprint and overhead associated with real estate and maintenance costs of the space itself. For any company in today’s global and fluctuating economy, there is a level of uncertainty associated with growth. When it comes to long-term contracts for office real estate, businesses are burdened by the space asset liability on their books.
Shared workspace operators attract corporate users with the prospect of minimising risk and unshackling their business from expensive monthly recurring costs and time-consuming facility management tasks. Corporates benefit from the elasticity to expand and contract their business where needed to accommodate growth. They can be more agile and mobile versus tethered and stagnant, from the number of employees or workstations to where the office is located.
That said, getting started or expanding to a commercial real estate property large enough to offer a sizable square footage to corporates with anywhere from fifty to 250 employees is a priority. When fitting out your space, keep it as flexible as possible to account for increasing and decreasing headcounts, and it may be a greater upfront investment but ultimately gives you more to work with down the line.
CoreNet Global projected that North American offices would provide 151 square feet per person in 2017. They noted that this amount had decreased over the years from 225 square feet in 2010 to 176 square feet in 2012. That said, if you’re targeting corporate users who need between 25 and 50 workstations, you’ll need, to factor in an average of 3,500 to 7,500 square feet of your space for that tenant alone. When it comes to shared space, the range is between 10 to 20% of the total rentable square footage. On the whole, the more space, the better. But if you’re a new owner or operator, you may want to start small, prove a profitable and working business model before you are knee deep in real estate and overhead costs without the customers to support it.
When fitting out your space, factor in private offices, meeting or conference rooms, phone booths, training rooms and event space. While an open layout is good for a bustling community, there is no doubt that your end-users will value a space free from noisy chatter or workers on video and phone calls. Not only are private spaces revenue generators but they give help your customers be productive.
Part of moving from a non-owned or leased property to a shared office environment in many cases means losing a level of control over the design and customisation of the office space. For workspace owners and operators extending white-label space fit for branding is an amenity that not all workspaces will offer. Differentiate your proposition by enabling your tenants, especially large corporates, to tailor their space to fit their branding needs.
Securing Assets and Property
Finding property in a growing market may be challenging and expensive. Discuss new business ventures or negotiate creative terms with your landlord that expand your space and give you more leverage to attract corporate clients while also offering a competitive advantage to your landlord. Propose transforming underutilised or outdated space in their portfolio to create a larger shared workspace footprint. If you have experience in the business and can demonstrate a profitable and working business model, you may secure space more efficiently.
Suggest a joint venture to your prospective landlord or real estate developer to build out serviced offices with enough corporate space to meet demand. Build a relationship with your landlord. If you’re already managing a Coworking or shared workspace, chances are you’ve got your business down to a science. (If not, check out our eBook on Managing Your Workspace!) In this scenario, you can offer a wealth of knowledge to a building owner who otherwise wouldn’t know where to begin to create a space-as-a-service business within their existing portfolio. As a current lessee, you can serve as a gateway for your landlord into a new market that optimises his or her property assets.
Infrastructure and Technology
We’ve said it before, and we’ll repeat it, fitting out your workspace with quality infrastructure designed specifically for multi-tenanted buildings will not only assure quality services but will improve member experience and therefore increase customer retention. Corporate users, enterprise and big business tend to have specific technical and system requirements to uphold legal and compliance regulations within their industry. A shared wireless network just won’t cut it. Dedicated VLANs, wired connectivity, VOIP and phone options allow space-as-a-service providers to reach a wider range of tenants who require more complex infrastructure to run their businesses.
Enterprise-level network security protects you and your tenants from malicious users and preserves the integrity of the internet connection in your workspace. Installing cable for wired connectivity at each workstation will alleviate the strain on your Wi-Fi network. Encouraged corporate or resident members who occupy your space on a more permanent basis to plug in to access the internet. They’ll have a better connection and will improve the overall quality of the Wi-Fi network for your more flexible members.
While legacy technology hardware may not be necessary when shifting to a shared workspace, chances are the network infrastructure and cabling required to support a VOIP system, or advanced unified communications will be. As the real estate needs and workplace strategies among corporates continue to shift, bare bones Coworking spaces and minimal services won’t make the list of suitable options for corporates and enterprise-sized companies.
Workspace Management and Community Software
Just as important as the technology that powers your space is the software and applications you use to enable your members and community. The attraction of Coworking is that it provides a new type of workspace, but more than ever, corporate employees – especially those who worked remotely – value the community, networking and overall social aspect of it. While some workspaces employ Facebook or Slack for internal and member communications, software built for shared workspace communities fits the specific needs of members and allows you to customise your digital workspace experience. Member directories, online social boards and the ability to interact allows your clients to network beyond the physical space and explore the workspace community.
A platform that connects sites and people across multiple locations and cities is an added benefit for corporations that have multiple locations. For this, however, you must implement the appropriate network infrastructure that can span and scale beyond the four walls of your existing workspace.
Attract with Amenities
As the way in which we work continues to change, the workspace has become an area where work, personal and social lives mix more and more. Fit out your space to account for social and leisure activities for your members. From ping-pong and pool tables to an on-site snack-market or café, fostering an interactive community is vital to a thriving Coworking space.
When it comes to events and networking, free social and professional events will encourage your community to grow. Open events up to non-members and consider charging for special guest speakers or more elaborate events to generate some additional revenue. Beer on tap, taco Tuesdays and lounge areas are value-adds, but be sure members aren’t abusing them or disrupting working hours of other businesses.
Some amenities such as free coffee and filtered water are considered standard in any membership. Nursing rooms, day-care, yoga studios, and showers are amenities that are priceless for workspace occupants. You may choose to charge a la carte or in an all-inclusive lifestyle membership plan.
Flexible Workspace for All
While it may have taken them a while to get into the game, corporate companies have joined us in the flexible workspace market. This influx has sparked an interest in CRE and developers to jump on the bandwagon as well. The spark in uptake will drive the market to the next phase. We’ll increasingly see commercial buildings built specifically for flexibility, incorporating state of the art architecture and design, and utilising innovative technologies made for multi-tenanted infrastructures.
From entrepreneurs to startups and now corporates, the new worker, and business workplace strategy are flexible, collaborative and connected. Workspace operators now more than ever are at an advantage to deliver these essential needs to drive growth and innovation in a constantly changing global economy.
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