Coworking Firms Are Figuring Out How To Make It To Greener Pastures
Operators of coworking spaces and flexible offices, which enjoyed a meteoric rise in popularity in the last decade but have been wounded by the coronavirus pandemic, are banking on having long-term staying value — it is just a matter of making it through the lean times.
“The next six to 18 months are going to be difficult,” Primary CEO Lisa Skye Hain said on a Bisnow webinar examining the future of flexible offices. “But large and small companies are going to want the flexible terms that the coworking and flex office industry affords them. That’s the No. 1 reason we’re going to do great in this industry in the long run.”
Skye Hain, who was one of WeWork’s first employees, co-founded her own coworking operation called Primary. It has two locations in Manhattan that closed during the worst of the health crisis.
“It’s the survival of the fittest,” she said. “The landlords hold the keys to the castle. To the extent that operators are able to negotiate terms with their landlords, that will define whether they are able to make it through this time.”
Undoubtedly, coworking and flexible operators have been badly hit in the pandemic, as companies across the globe cut costs wherever possible and individuals quickly shift to remote work.
WeWork, already slashing thousands of jobs in the wake of its failed IPO, has now cut its workforce from more than 14,000 people last year to about 5,600, per a Financial Times report in July. It is closing locations, too, as it aims to streamline its portfolio. Convene has also cut staff and worked to renegotiate leases. Knotel, which laid off nearly half its employees back in March, has been accused of skipping on rent and is reportedly looking to sublease some of its space in New York City.
Panelists on the webinar, which examined the outlook for the industry, the fallout of the working-from-home trend and the impact of the exodus from New York City, agreed that while the current moment is challenging, the long-term appeal of flexibility is here to stay.
Skye Hain said most of the deals signed at Primary locations in the last few months have been for one- and two-person spaces for people looking for space to work while also remaining safe. That is going to make up the bulk of demand for the next few months, she said.
Tishman Speyer Managing Director Thais Galli, who oversees the company's flexible office outfit Studio, said there have been some major benefits of being both a traditional landlord with a coworking arm as the office market digests the impact of the virus.
“What it allows us right now is to not have to lock down 10-year leases at a really low rent but instead lower the rent on the coworking side and, once things recover, you’re going to recover with it,” she said.
Tishman established Studio in 2018, and it now has locations in New York City, Washington, D.C., Chicago, Los Angeles, San Francisco and Brazil. The key to staying relevant, she said, is to listen to what customers need and want amid the current crisis.
“We ended up getting a lot of new tenants, getting a lot of new members in the space because we understood [a safe environment] was important,” she said, adding they are working with members to help them find ways to commute safely.
Studio members are able to access Tishman’s amenity platform, Zo, and Galli said the company has partnered with child care providers in order to help workers return to their desks.
Establishing a sense of community, particularly in the era of social distancing, has been crucial. Studio has worked to offer outdoor events, as well as virtual cooking, yoga classes and remote happy hours
“[We are] bringing people together. People are home, and a lot of them have families, but a lot of them live by themselves,” she said.
Considering the emotional and mental toll of the pandemic, panelists said psychological support may become a major offering at these kinds of operations. Providing ways to calm and soothe workers may potentially be a new kind of amenity that will set one flex office provider above another.
“This pandemic has really stretched people to their limits. … There is a real loneliness factor,” Deco Group partner Benjamin Dyett said. His company is a coworking consultant that helps companies and owners introduce flexible offices into their workplaces and portfolios.
“The larger companies are really acknowledging this and seeing it and trying to figure it out," he said. "It’s affecting their productivity — that’s their bottom line.”
Right now, the Deco Group is developing a plan for a flexible office concept that will feature a full-time mental health worker with whom people will be able to book time to talk.
“It’s not a gimmick; it's an attempt to address an actual problem,” he said.
Galli said that kind of approach continues a shift that was already underway: the blurring of the line between people’s professional and personal lives.
“I don’t think it’s a sales tactic. It’s acknowledging that the workplace is more than a place to just go and work from,” she said.