The Global Coworking Unconference Conference spent its seventh year in the USA in the mile-high city last week. As with every GCUC event, GCUC Denver had a unique flair to it. Hosted in the Ellie Caulkins Opera House and covering the most essential coworking topics, GCUC brought together over 400 owners, operators, investors, and vendors to the coworking market. From Camp GCUC and the unconference to surprise performances and big announcements, GCUC just keeps getting better.
Camp GCUC: Coworking Fundamentals
Day one of GCUC offers new entrants to the coworking scene the opportunity to tune in to industry experts speak about their experience and insight around real estate, design, community, technology and more.
When it comes to technology, workspace veteran Bill Jacobson of Workbar stressed the importance of identifying who your technology will serve in your space, understanding typical technology requirements and priorities for members and operators at different stages of growth, and investing in internet infrastructure that can support all of those critical occupiers and stakeholders. The “universe of technology” in a coworking space is critical to not only members but to operators, as well. Member services and management, operations and reporting, as well as automation and building a digital community, are all elements that are dependent upon reliable software platforms.
Coworking: A Movement for a Better Future
Day two of GCUC kicked off with an energetic welcome from MC, Tony Baciagalupo, who brought to stage Liz Elam, the Executive Director of GCUC Global. “Coworking is the little engine who could,” said Elam about the powerful ability our industry to change the world. In particular, to build and grow communities that improve wellness, cure loneliness and help prevent depression, an increasingly global epidemic.
With a focus on wellness and nature, GCUC USA started off with a keynote by Philip Vanhoutte, the co-founder of Ozadi, a nature-focused wellness company. Philip, who also co-wrote the Smarter Working Manifesto, highlighted to the audience Workplace Wellness Ingredients. For one, managing noise by being thoughtful about workspace design and layout and considering the ABCs: absorption, blocking and covering to prevent sound distribution and create an environment conducive to work and productivity. Second, activity-based working recognizes that there are a variety of spaces suited for specific types of activities that are carried out in the workspace. The third ingredient is Vitamin N; N for Nature. Bringing nature inside, whether by design or technology, allows us the benefits of nature within our day-to-day routine that is heavily focused within closed spaces, in front of bright screens, and rushing from place to place. The fourth is Talent Gardening, and it refers to the importance of reflecting upon our careers and considering our passions, strengths, and skills to drive change and improvement. Coworking operators have an opportunity to not only create the spaces but also to provide additional Human Realization Services for their members where this can be done. The last ingredient according to Vanhoutte is experience benchmarking, the activity of listening to and meeting occupier needs to create a more successful workspace via the human experience and measured performance.
Women in Coworking
One of the most exciting things to see this year in coworking is the growth of female-focused coworking spaces and initiatives. A dedicated panel on women to watch in coworking brought Amy Nelson of The Riveter, Ashley Proctor, collaborative community advocator, Iris Kavanaugh, Women Who Cowork leader, and Angel Kwiatkowski, Fort Collins space operator, to discuss the impact females are having on the coworking market. Their combined efforts are bringing attention to the enormous opportunity that all operators – although women especially – have to impact and grow communities and drive values and movements for social good.
For Amy Nelson, who just raised $100M in seed funding for the Riveter, there’s “an enormous opportunity to show you can build a movement, do social good, and still be profitable.” The all-female panel highlighted the large disparity between female versus male funded ventures. Of the 1% of the funding that startups receive, only 4% is allocated to women. Meanwhile, only 1 in $23 of small business loans goes to women business owners. With these stats in mind, the female leaders emphasized the influence that women have in coworking – they are owners, operators, community managers, receptionists, event coordinators, and other predominately female-held roles. Women are delivering services, focusing on hospitality, and building communities around shared values. And they demand more funding and more consideration when it comes to the amenities and services that are provided for women in spaces within coworking spaces.
Research and Differentiating in a Dynamic Coworking Market
GCUC brought together research leaders in the coworking market. Carsten Foertsch of Deskmag, James Rankin of Instant Offices and Steve King of Emergent Research hosted a research roundtable to help frame market growth and trends. “Coworking is transformative, disruptive innovation,” said Steve King. The three main drivers of coworking are independent and remote workers, startups and micro businesses and large organizations. Coworking is no longer restricted to the freelancer community; it has disrupted the entire office market to encompass all occupiers. The fourth wave, according to Emergent Research, is geographic, industry and niche expansion, and we’re in the midst of it. When it comes to niche spaces, it’s critical to define and understand geographical aspects. Steve highlighted strong growth figures in the number of US coworking spaces, tracking at 2,9k spaces in 2015 compared to 283 in 2010. Coworking membership also saw a significant increase from 331k in 2015 to 650k in 2018.
Carsten revealed the first US results from Deskmag’s Annual Coworking Survey. In a snapshot:
The average number of members per coworking spaces is 99; up 7% from last year.
US survey respondents claimed there are 1.65 members per desk.
44% of US operator survey respondents are profitable; down 8% from last year.
Of spaces that are profitable, US operators claim a 16% profit margin.
89% of coworking community members in the US agreed with the statement that “Being a Member of my Coworking Space Makes Me Feel Good” and 84% agreed that “I Can Trust People in my Coworking Space”.
Top unique selling points for coworking spaces in the US include (1) enjoyable work atmosphere (2) attractive design and fit-out followed by (3) a thriving community
James shared an overview of the operator market share in the US and noted specific geographical hotspots. Market demand is positive with 62% YoY growth when comparing Q1 2017 and Q1 2019. Also very interesting to note that 75% of occupier searches now start online. 72% of respondents surveyed by Instant expect to see further operator consolidation in the future. Instant also provide insights around growth in secondary cities driven by increased savings and affordability for employees. Steve elaborated on key drivers that contributes to a “hot” market:
High cost of living
High levels of education
After a surprise Opera performance during the break, GCUC got back into action with a discussion around niche spaces with Dori Howard from The Jane Club, Paul Hemming, founder of Template Night Club and Zen Compound, Stacy Taubman, Founder and CEO of Rise Workspaces, and Jayson Harris, co-founder of Greenspaces. From onsite childcare and sustainable communities to female-focused workspaces, niche coworking operators are creating hyper-focused communities that share common values. For Dori Howard, at the Jane Club, it’s about “going after specific people and asking them what they need to be more productive and successful.”
The afternoon’s session on Differentiating in a Saturated Market brought together Jacob Bates of Common Grounds, Jamie Miller of San Diego based Union Coworking, Jonathan Puleio of Humanscale and Rachel Wilcox of Varidesk in a panel led by Rachel Bannon-Godfrey of Stantec. The million-dollar question, as asked as well at GCUC UK, is whether the coworking market is saturated. Bates highlighted that a mere 1% of US office space in the US is flexible. According to a study by JLL, the US market flexible workspace inventory was projected to hit 30% by 2030. The panelists concurred that we haven’t hit the point of market saturation. There is ample room for growth.
When it comes to making your brand stand out in the fast-growing coworking market, “the level of control that occupiers have over the space” can play into your differentiation strategy. Enabling them with on-demand access to products and services and the ability to book and pay for services at their fingertips, to leverage your community and integrate themselves and their companies with both the physical and digital environments of the workspace are key. For Puleio of Humanscale, removing friction from day to day tasks in an office environment allow occupiers to optimize performance and be more productive.
Panelists also highlighted task-based working and the opportunity for operators to customize the environment to lend itself to specific tasks without having to renovate the space completely. Flexibility and forward-thinking in design, layout, and amenities can be a critical component of differentiation as well.
According to Jacob Bates, what’s evident is that in many aspects, “owners of real estate haven’t yet changed.” While many commercial real estate stakeholders are grasping the immensity of the coworking market as it infiltrates their industry as a viable and profitable model, there are still many that maintain the “long-term thinking” over the short-term approach to leasing and profits. For Bates, it’s about improving how space is utilized by way of informed decisions. “You can innovate and transform an outdated asset class.”
What’s so intriguing about coworking is that it has taken something as basic and boring, for lack of a better term, like office space and has revitalized it to represent vibrant, motivating tech and community-driven spaces that are both fulfilling a need for new ways of working as well as driving them.
Unconference: The nitty-gritty of Coworking
The last day of GCUC in Denver brought an insightful and energetic unconference – crowd-sourced session topics that were covered by industry experts with the insight and active participation of attendees. This year’s themes were influenced by questions such as: “what are ways to increase member engagement? How to raise funds. How can technology help members to focus in a coworking space? What is the best software to manage your space? How to build a community in a suburban area? How can we make our spaces more impactful and meaningful? The list goes on! The day’s sessions included: nature, management agreements, marketing strategies, coworking software, child care, next-level community building more.
Real Estate Structures
The morning kicked off with real estate structures and was led by Giovanni Palavicini of Fronteras Commercial Real Estate Strategy Attendees wanted to know about leasing versus owning, how to structure management agreements and how to compete with traditional real estate stakeholders. “Management agreements aren’t cookie cutter,” said Palavicini. The construction of a management agreement “depends on factors on both sides – operator and landlord: who is willing to take on more risk, who has the banking relationships, what is each party trying to achieve?”
Contributors to the conversation such as Mara Hauser of 25N Coworking contributed her insight based on long-standing relationships with landlords and developers. Each situation is different and will vary based on the property type and the objective of each party. However, Hauser pointed out a few things to consider: “what is the operating fee? Is there a sales incentive? What is the profit split? What’s your exit strategy? What’s the non-compete agreement? When will you be paid? What exactly will they pay you for? What reports will they see?” The overarching advice in this session was to consult with broker experts who are familiar with the coworking model. They can help operators to negotiate management agreements based on experience and success in previous deals.
The Coworking Software session revealed an agreement among operators that printing is a huge issue when there are multiple users and devices. Solutions such as eZeep cloud-based printing facilitate simple printing for operators and their members. A soon-to-be space operator raised the question of how software can scale to adapt to workspace needs it grows. For many operators starting out in coworking, price point is a huge factor. Depending on investment and operating budget, DIY IT is a viable solution for those operators on a shoestring budget. However, there is a tipping point where DIY becomes an inhibitor to growth.
There are software platforms that enable a sustainable and scalable operation while helping operators keep pace with competition and deliver a better member experience. Beyond two locations is generally when coworking operations outgrow DIY and even managed IT solutions. Replicating IT environments and integrating the many aspects of a multi-site operation, such as reporting, networking, billing and invoicing, become a challenge with basic software that is not purpose-built or backed by cloud-infrastructure.
The coworking software purchase decision broadly relies upon the immediate needs, financial reach and medium to long-term growth plans. Ambitious operators focused on growing their portfolio, seeking funding or partnering with landlords are those that are most inclined to make a deliberate investment in comprehensive and scalable workspace software and technology. The extent of capabilities and functionality lends well to enterprise-grade reporting and data insight that is often required by investors and even landlords engaged in management agreements. However, smaller operators who value operational simplicity, comprehensive features, and functionality, and who seek to offer a superior member experience will budget exclusively for coworking software and technology solution that meets their needs.
US Coworking Market Data
Instant Offices, the leaders in flexible workspace data and research, curated their latest data on the US market based on a recent survey. James Rankin and John William agree that the market has not yet reached saturation point. In fact, the market is primed for growth. Despite market entrants by the “giants” such as We Work and Spaces, more than half of the US market share is comprised of independent operators.
Based on their data, they estimate that 3% of new office inventory is flexible in New York, versus 5 to 7% in London and approximately 1% in Denver. In terms of market share, Pure Coworking comprises 16%, Serviced Office or Executive Suites 43%, Hybrid 35% and Other 6% according to Instant’s flex-space types. The highest growth rates are among hybrid spaces, which have been defined as flexible workspaces with a focus on private offices and an element of shared or collaborative coworking space. You can learn more about coworking market data on this recording of a recent webinar with GCUC and Instant Offices.
Recent research and surveys conducted by Instant Offices reveal trends in the market. Not only is the footprint of coworking expanding, but the size of the space being taken is larger by square footage. Desk space is decreasing while private office space is increasing. Pricing pressures are also appearing for those operators unable to distinguish their services and member experience from the competition.
Lastly, they revealed what customers really want. The top response was 24-hour access, followed by bespoke office layouts and fitness suites. The first is a clear indication that occupiers want on-demand access to a working environment to accommodate new styles of working. The second is indicative of the influx of corporate occupiers who are looking to coworking as a longer-term real estate strategy however want to maintain their own brand identity and design layout with a turnkey solution fit for their needs. The third points to the increasing focus on wellness within the workplace and coworking being a viable medium to encourage health and wellbeing.
As always, the GCUC Unconference was insightful and left attendees with FOMO on the information being shared in overlapping sessions. GCUC Denver did not disappoint. It brought together the most influential people in coworking to discuss their triumphs and failures, their insight and experience, and of course, to dance the night away with the essensys team and GCUC global sponsors at the closing party at Temple Nightclub! Thanks to the organizers and attendees for another notch in the GCUC belt. Until London!
About the Author
I've been writing content about flexible office and technology for essensys since 2015. My focus is to bring engaging and insightful perspectives to the flexible workspace sector of the commercial real estate industry.
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