The simple act of going to work looks a lot different than it did 20 years ago. Thanks to today’s technology and an expanding gig economy, the daily grind may mean sitting in a home office, plugging in a computer at a café or joining some colleagues at a coworking space—a trend that has gained serious traction over the last few years.
According to the publication Coworking Resources, there are an estimated 18,287 shared workspaces worldwide, up from 7,805 in 2015. By 2022, this number is projected to hit 25,968.
To illustrate the growing popularity of these spaces, take a look at coworking giant WeWork, which last year became New York City’s largest private office tenant—a title the company has also claimed in Chicago, London and Washington D.C. As of January, coworking company Impact Hub had 92 locations in 81 cities worldwide. Office supply store Staples has launched its own coworking spaces in select Boston locations. And other niche shared workspaces are tailored to specific groups, like writers, designers or women.
Whether it’s freelance and remote workers seeking desk space or established businesses looking for more flexible leases and loads of amenities, coworking spaces seem to answer a number of these demands.
Coworking’s Many Models
From a property management perspective, overseeing a coworking space brings a variety of benefits, as well as special considerations.
|Landlords need to understand that they can’t manage coworking tenants the same way they manage other tenants.”|
|-Drew O’Connor, Cushman & Wakefield, AMO|
“Landlords need to understand that they can’t manage coworking tenants the same way they manage other tenants,” says Drew O’Connor, a senior managing director for Cushman & Wakefield, AMO. “They need to have a different mindset, and they need to think outside the box.”
O’Connor oversees 39 million square feet of office space in Manhattan, which includes various models of coworking space.
“These coworking spaces have changing tenants that may all have different operating models and work different hours,” O’Connor says. They may have different needs in terms of the amount of space and lease length, too, and the operations can change from month to month.
He also encounters coworking operations with enterprise tenants, which are typically larger companies that rent coworking space because they need some room—maybe a floor or two—for a finite period of time, like during a special project. He says these tenants are more like traditional tenants because there is usually only one tenant for a longer term, almost like a sublease. “And the coworking company oversees all of this,” he says.
For both conventional coworking tenants and enterprise coworking tenants, his interaction is only with the coworking space’s manager, not the space’s individual tenants.
Landlord-managed coworking spaces are also growing in popularity. One example is the unique CoLab @ 55 Merritt in Trumbell, Conn., which is also a successful instance of the adaptive reuse of an empty office building. Offering office and flex space, this shared industrial workspace is geared toward tradespeople like painters and carpenters. At the CoLab, the building’s management oversees all of the individual tenants that rent coworking space.
|The landscape is evolving right now, and property managers need to be evolving and have an open mindset.”|
|-Tim Johnson, Colliers, AMO|
Bob Miller, a senior managing director at AMO Firm Colliers International, and Tim Johnson, a client services coordinator with Colliers, are based out of Stamford, Conn., and work closely with this building’s property manager. They oversee the leasing for the space—a 110,000-square-foot former data center built in the 1970s. The building was used by Unilever until the company moved out in 2017.
“We got involved with the project earlier this year,” says Johnson. “We’ve been collaborating with the management using our market knowledge of the current trends, and the conversation on how to best use the building is still evolving.”
Overall, O’Connor says having a coworking space in your building can be a major asset, thanks in part to the incredible amenities many coworking companies offer.
“It’s all about the tenant experience, and amenities are the way to enhance that experience,” O’Connor says. “Coworking spaces really do a great job with this.”
For example, WeWork Chicago locations offer lounge-like common areas, hip kitchens and bike storage, in addition to office staples like high-speed internet. Ice cream socials, cheese tastings and expert-led panels round out the social calendars.
Demand has landlords working to include amenities in their spaces. By having a coworking space in the building, a landlord might be able to team up with the tenant to offer some of the amenities rather than creating them from scratch. “They may be able to partner with the tenant to offer smart conference room space or a virtual doorman,” O’Connor says. In addition, master coworking tenants also offer the building’s non-coworking tenants the ability to expand, if necessary.
Due to the nature of the space at The CoLab, potential tenants have not been expecting a full menu of fancy amenities, but they are attracted to features like furnished offices.
“We are offering an upscale option for industrial space,” Miller says. “We have a really nice common area, the entrance is very professional, but then they could go back to work in their wood shop.”
Adds Johnson, “This is essentially a plug-and-play set-up. They aren’t expecting a kegerator or other amenities like that, but we are going to be looking for a lot of tenant feedback to see what they want.”
Adapting to Flexibility
Relaxed options have been one of the biggest draws for coworking spaces. In general, they offer more flexible lease options and the ability to easily add or reduce the amount of space needed.
Miller says a coworking option can be much more appealing than a traditional office lease, which is usually no shorter than three years.
Adds Johnson, “When it comes to renting a private office, we can do leases for as short as three or four months. Why commit to anything longer than you have to? We’re also very flexible in terms of pricing and have options for pay-as-you-go or paying up front.”
But where there are flexible leases, there will be turnover. So for a property manager or landlord overseeing these properties, a few extra to-dos are added to the list.
In a space like the CoLab, where building management oversees all of the individual tenants, managing that roster will be one of the biggest challenges, says Johnson.
“The other challenge is just keeping track of all the schedules,” he says. “You’re going to have a lot of tenants in and out. We have a lot of lease expirations, so that can be a burden. Spaces have to be ready for move-in; we have to coordinate Wi-Fi and moving vans.”
While turnover and scheduling can be predicted somewhat, there will be an increased need for creative thinking, says O’Connor.
“Managing a coworking space is an ever-evolving process, and the building management needs to evolve with that,” he says, emphasizing that property managers will have a number of considerations to keep in mind.
Coworking operations have different hours—some late into the evening. “You may have some of the coworking space’s tenants in the building until 10 or 11 at night,” he says. Property managers may have to adjust the HVAC for fluctuations in building density or run the air conditioner longer into the evenings if the office is open later.
Depending on the building, there may be extra considerations for lobby security. “If it’s a typical Class A building with turnstiles and badges, all of the tenants will be required to be entered into the system.” Some of the coworking space’s tenants also might have visitor foot traffic, which can further impact this.
Janitorial service might also require special scheduling. “Because employees may be working late into the night, the janitorial service might have to clean the space during the day,” O’Connor says.
Miller and Johnson realized how nimble they would have to be the moment potential tenants began inquiring. While the CoLab has been marketed to industrial users, the variety of interested tenants has surprised them.
“We’ve had an ad agency, an e-distribution company, a computer development company, a life coach, a marketing company, contractors and even a retailer from the mall who needs more office space,” Johnson says. “They have for the most part been mom-and-pop businesses. Some were looking to get out of their home offices, and they wanted a space that was secure and locked.”
Johnson and Miller have also realized there will be times when a tenant isn’t a good match for the space, such as the children’s entertainment business that inquired about a lease. In that particular case, they knew the building didn’t have the necessary amenities to accommodate the potential tenant.
To ensure a beneficial tenant relationship, a solid rapport between property management and the master coworking management needs to be established, O’Connor says.
Johnson says he thinks there are still many iterations of coworking yet to be seen, and it’s going to continue to rise in popularity. O’Connor agrees.
“The landscape is evolving right now, and property managers need to be evolving and have an open mindset,” says O’Connor. “Managing coworking spaces does present some challenges, but there truly are some benefits. You just have to be open to the change.”