Coworking has achieved a lot in the past decade, but many questions still linger about it’s viability and profitability. Digitalisation of work will most likely mean letting go of big dreams of disrupting real estate and refocusing on community, culture and collaboration.
For a decade now coworking has been saying that it’s about more than space. The trouble being that whatever that more than space is, it’s still something very much in the space. People, events, community, serendipity you name it, it’s always about activity, service or experience 100% attached to the space. Meaning you have to physically be there to get it.
Service to real estate is a bit like a (wife’s) mother-in-law in a southern marriage. Let’s put it this way, it’s a marriage between more than two people and only the wife can be separated from it. For a decade now coworking has been unable to change with real estate, what southern men have with their mothers: to grow independent and fly out of the nest.
If you can’t describe your coworking service without the space, what you probably have is friendly staff in a hip office with a few events. This is not to say that it’s not already an improvement to what most likely would’ve existed in the past, but it has major implications for coworking to find a way to grow and scale profitably.
Better space service
Improving the service has always been a major dilemma for real estate. How much can you spend on it without jepardizing earnings? Is coworking then an innovation or investment for real estate? If a smaller space requires more people to produce the service, with rising property prices, where does the extra money then come from? Particularly if you’re targeting the poorer segment of the market!
Even if you’re not pricing your service by the square, your customers are. The best product in coworking is still a tiny glass room with WiFi and coffee with a market value pretty much set in stone (or concrete as it may be). With tiny spaces it’s not squares your interested in anyway, but how many people you can squeeze in it. Not sure you want to spend your time and money disrupting that.
A network of spaces is definitely growing in value, but it would have to be so big and easy to access to compete with third spaces like cafes, lobbies and meeting rooms that the only way of doing it is probably through sharing. Think of Hilton VS Airbnb.
Show me the money
If it’s really about more than space, you really should be making money out of it. That more than space part has to produce monetizable value to the coworking business or otherwise you’re losing money. The easiest and smartest way to do that is by linking it with existing standalone services like catering and events and designing that into a trendy brand. But we can all agree that we’re not talking about disrupting anything with excessive new value, but just giving the customers an incremental improvement to what they already have (workspace with canteen on the ground floor).
The thing to understand about coworking is that the spaces are all uniquelly defined by their owners, layout, location, brand, services, customers and underlying revenue model(s). This is probably the part that WeWork has been so good at standardizing. Disregarding the unfortunate fact that it will never make money to its owners, WeWork is one standard coworking service irrespective of people and location.
Adding value to workplace not space
The real (estate) problem with coworking is of course the office space and the absence of supporting business and revenue models. There is no standalone value if you remove the offices so you’re having to compete with real estate for earnings.
Scaling too fast instead of innovating, WeWork was unable to create value I dependent of space and most other coworking operators are too small or locked in the old “one bored receptionist” office hotel model to innovate something new.
After a decade of going the real estate path, it’s time we think about disrupting coworking by taking it out of the “leasing, designing and converting cool new office space” business and turn it into added strategic value to existing (corporate) workplaces (and spaces) to support digitalisation of work.
Say hello to corporate coworking!