Changing dynamics of Co-Working Industry

• Coworking space – an option to work from anywhere
• Impact of Covid-19 on the coworking space industry

Coworking has been consistently gaining traction over the past few years, wherein the emergence of the Covid-19 pandemic has further enhanced its importance, making it the preferred workplace of today’s workforce. This can be evidenced by large companies increasingly seeking to boost workplace experience as a way to attract and retain talent, and that a significant percentage of workers who have the option to work remotely or from home, prefer to work from a coworking space. A few years back, coworking was considered as a trend or a “movement”, with many believing it would fade away. Today, coworking is a well-accepted industry that has led to a new and innovative open working atmosphere, which allows for several unrelated companies and people to share a space and work side by side.

As indicated by Statista, the coworking spaces has seen a gigantic growth with the growth from around 600 firms providing services in the space in 2010 to over 26,300 firms estimated to be working in 2020.

The below graph depicts the number of people working in coworking spaces across countries is expected to increase to around 2.68 million in 2020 which is almost 128 times higher than the 21,000 workers in 2010.

Despite all the positive expectations over the long-term, the recent outbreak of COVID-19 is affecting every industry with coworking space is no exemption. As per Research and Market’s report, the global coworking industry market size is expected to shrink from US$9.27 billion in 2019 and to US$8.24 billion in 2020, recording a double digit drop in overall value. The decline is primarily due to economic slowdown across nations owing to COVID-19 pandemic and measures to contain it. The market is projected to recuperate and reach US$11.52 billion in 2023 at CAGR of 11.8%. The rise in the number of people working remotely or from home due to the lockdown restricts the expansion of the market at least in the short-term. For example, the coworking space operators have seen about 50% decline in footfalls in March 2020 as there was an increase in people working from home owing to COVID-19 pandemic. Moreover, as per report published by Business 2 Community in April 2020, the number of people working remotely has grown by 44% in the last five years, with 7 million people working remotely in the US before the spread of COVID-19. However, the number of people working remotely has increased enormously over the last few months, consequently declining the revenues generated by the coworking spaces market during 2020.

Undoubtedly, the way we used to work have changed a lot, but the question is, will these change last? Before the pandemic, a lot of companies, especially start-ups and SME's had subscribed for the coworking spaces but now they also facing issues in paying their membership fees. Leading co-working office providers like Wework and Knotel, who were expanding at an unprecedented pace, are currently experiencing the after-effects of the economic contraction. Many organisations in this sector have shut down their services and/or postponed their expansion plans alongside reducing staff strength. For instance, one of the leading players in this industry, Wework, has already laid off thousands of workers globally a few months ago and is again planning to make an additional round of layoffs with a possible restructuring of part of their office sharing business model. Also, the company lost its proposed US$3 billion dollars funding from Softbank's Vision Fund. Smartworks, which had raised US$25 million in funding in November, initially intended to use the funds to increase its portfolio by 5.5 million square feet, but has now revised its plans to add only around 4.5 million square feet of space by December. Similarly, ABL Workspaces, which planned to add 15,000 seats to its pool of workplaces by March 2021 has now announced it has deferred its expansion plan by a year.

Even though the coworking sector is expected to be to hit as a whole, the industry could officially drive coworking to be part of the mainstream, possibly through and after this health crisis. In this challenging time, having a plan in place that includes flexible coworking solutions may be the best way to proactively address the underlying uncertainty. Coworking spaces are not only providing a cheaper option than a conventional office space, butalso offer adaptability in terms of period of rental agreements. Coworking spaces can be leased on a monthly, day-to-day, and even hourly basis according to need. Today, an increasing number of organizations might look at this opportunity to reduce costs as well as reassess their working culture by providing more flexibility to their employees. Additionally, providing a decent working space to employees could further benefit the company in terms of higher productivity and enhanced commitment. Once the current pandemic eases out, companies would also lay more importance on cost optimisation and are likely to prefer flexible workspaces. Also, most of the corporates would avoid capital expenditures and look to coworking facilities to expand their business and focus more on core competencies.

Coworking facilities are also gearing up to face the upcoming opportunity and challenges by taking necessary steps to protect and retain their members, including the following:

• Reduced seating capacity in desk area with maintaining social distancing norms
• Disinfectant bottles being placed in the common areas. People are asked to wipe down their area after their work is finished
• Providing layered masks to everyone
• Deep cleaning of common areas
• Removal of snacks and shared food offerings
• Plexiglass barriers have been installed at the dedicated desks
• All in person events and gatherings are suspended temporarily
• Screening of visitors
• Keeping up with the advisories from health regulators such a WHO

Along with the above precautions, some operators are also installing new air-conditioning systems to take care of air quality and prevent airborne viruses and cross-contamination between offices within a coworking setup. To ensure synergised business continuity, the companies within the coworking industry are expected to explore acquisition opportunities, alliances, and merger consolidations. Although the coworking flexible offices are reeling under the impact of pandemic and the demand would be subdued over the next few quarters, the industry is bound to survive in the long-term and will have a promising future once the pandemic pressure eventually eases out. The COVID-19 is certainly not an end to the coworking culture as people would find that the benefits of social meetings, in terms of emotional and mental satisfaction, would be a vital need for the wellbeing of a society as a whole.