co-working centres

Lessons from the rise of co-working centres

What large organizations should know about the popularity of pay-as-you-go office space
Thursday, May 28, 2015
By Chris Hood

Co-working centres are on a sharp growth trend, fueled by the increasing conversion of full-time corporate staff to contract workers. Affected employees become natural candidates for membership in these pay-as-you-go office spaces, particularly as they grow to appreciate the value of making connections outside of their single-client relationship.

Typically, it is individuals rather than large organizations who subscribe to co-working centres. Ostensibly, users (commonly referred to as members) pay a monthly fee in return for various levels of accommodation (open workstation, access to a common lounge, private office, etc.). But the real value of these spaces has less to do with the physical environment and more to do with people, which has implications for large organizations.

The business model

Co-working centres thrive based on their ability to develop an attractive workplace experience — one where co-workers sincerely care about each other, both as individuals and as successful business neighbours. This is their raison d’être.

But operators must attract members within the constraints of a sustainable business model. Rather than overinvest in space, people or technology, they need to get creative and find out what investments are most appreciated. This usually leads to heavily people-centric investments:

• Coffee quality over finish quality;

• Character-rich environments over bland cube farms;

• More choice, less space;

• Disposable furniture over traditional high-end systems furniture; and

• Human scale versus warehouse scale.

It is the diversity of people, backgrounds and experience found in co-working centres that seems to hold the highest value for members. Stories of cross-discipline enlightenment abound, as do the new ideas that emerge from these interactions.

The people-centric focus of these centres raises expectations about belonging to something more substantial than a constantly evolving organizational structure and a carousel of shifting space assignments. And for this, members are prepared to pay fees ranging from $25 to $1,000 per month.

Though the number of co-working spaces and participants is still relatively small, there appears to be a very passionate, thoughtful and active body of entrepreneurial operators who will continue to refine how they identify target audiences, secure desirable locations, and build communities around sustainable business offerings.

Lessons for large organizations

Co-working centres will acquire increasing relevance as choices for business people seeking value-add work and workplace options in the corporate world. Larger organizations could well adopt co-working to simultaneously reduce their corporate footprints and reverse the downward trend in employee engagement.

Co-working offers new models of on and off-campus teamwork and drives new connections between otherwise disconnected individuals. Co-working centres also offer building design and services lessons for large organizations.

A non-scientific review of more than 1,000 photos of co-working centres show a departure from the look and feel of quintessential corporate America. Gone, in many cases, are the systems furniture, drop-in ceilings and recessed fluorescent fixtures in favour of exposed structure, natural materials and perhaps a certain quirkiness of character that draws members in.

What’s more, the configuration of physical space is becoming more creative and varied, and users want choice. In one workplace program (with 16 different workplace options), more choice has led 79 per cent of employees to feel more productive than before and delivered an average 86-per-cent satisfaction level.

Similarly, co-working centres recognize value-add services such as a concierge desk and geek squads as key contributors to employee satisfaction. They mark a shift from self-help programs to personal touches.

Observation suggests that there is no clear relationship between providing the highest quality facilities and having the happiest and most engaged employees. Indeed, examples abound of high-quality corporate environments with low levels of employee engagement. It might be concluded that management styles, organizational culture and regard for people are significantly more influential than design — areas where co-working seems to score high.

The bottom line

Co-working centres are increasing in popularity, in part because they offer what many traditional workplaces do not: choice. Their founders are also getting smarter with their business models. As the recent financing round at WeWork — a leading company in this market — demonstrated, co-working is becoming big business. The company’s $5-billion market valuation and funding capacity to open 300 new sites at 30,000 square feet each is a testament to the rising tide.

Some co-working centres may well move inside corporations as smart organizations learn to generate their own thriving locations in efforts to boost employee engagement. These organizations will recognize that this movement is less about real estate and more about providing viable, satisfying and personally enjoyable communities.

Traditional work styles, and the work preferences of employees, are also changing rapidly. So are the very jobs themselves, and the way they are contracted. As these trends solidify, the qualities that define great workplaces will be further redefined by the move toward user-centred choice. Class A space may no longer be the people’s first choice — supplanted perhaps by people-centric environments of wit, character and welcome.

How to achieve this in the corporate environment is the challenge. It is not a design problem (although look, feel and atmosphere are important), but one of developing a business model which supports the hiring of talented enablers to make the community work. These people already exist in today’s best co-working centres.

Chris Hood is managing director and platform lead for Occupancy Services within CBRE’s Global Corporate Services organization. He is a past winner of Corenet’s Global Innovation Award, a founder and leader of its Workplace Community, and has spoken at industry conferences across the world.

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