We have all witnessed them. In the street-level windows of co-working spaces, bearded hipsters play table football. Or punk females are lounging on beanbags and pouring over computers. On every high street, these somewhat terrifying co-working facilities are cropping up.
Indeed, according to CBRE data, the market for flexible office space in the United Kingdom is rising at a rate of 13% each year.
London has firmly established itself as the worldwide leader in flexible workspaces, outpacing New York in terms of space and venue count. According to estate brokerage Cushman & Wakefield, flexible office leasing has captured a 10.6pc share of the London market since 2012, compared to an average of 2.9pc in Manhattan.
Indeed, WeWork’s rise in London has been so rapid that it is now the capital’s second-biggest office tenant, after the government.
IWG, the world’s biggest service office firm, reported a double-digit increase in revenue and occupancy in the first quarter of 2019.
According to JLL Research, up to 30% of corporate portfolios might be flexible workplaces by 2030, with the worldwide industry has already quadrupled in size since 2014.
“The way we work is changing,” says Chantal Robinson, operations director at co-working facility LABS. People no longer want to work in dull workplaces. They want an environment conducive to employment. Individual boxes are being phased out in breakout places where individuals may be a little more creative. These scheduled gatherings are becoming less structured and more impromptu.”
Indeed, the tendency seems to be extending to “enterprise” firms — those employing more than 250 people. Large corporations may want space for unique initiatives, wish to appeal to a younger, hipper demographic, or require a satellite office in a foreign location.
By the end of 2019, 40% of demand for flexible office space would come from big and corporate businesses, according to Instant Offices.
“The upside for the bigger commercial customer is that it alleviates the burden of caring about coffee orders, security, and air-conditioning maintenance,” Robinson explains.
“Many bigger organizations seeking new staff need to be centrally located and provide such amenities. They must be able to create attractive environments in which individuals may think and create wonderful things.”
Traditional landlords with various corporate tenants are increasingly constructing workspace-like structures that enable enterprise corporations to brand their Flexi-offices.
Additionally, co-working businesses are providing what they refer to as HQ Space, which can be more readily customized with corporate logos.
“Back in the day, serviced offices were reserved for entrepreneurs and start-ups,” explains Robert Pearson, assistant director of UK tenant representation at Savills. That is no longer the case. You’ve got large corporations snatching up valuable project space.”
Savills forecasts that as businesses distinguish themselves, niches in serviced offices will emerge: workspaces dedicated to fintech, fashion, or social enterprises will come up.
The advantages of adaptable office space
Co-working office spaces strive to offer everything necessary to operate a company efficiently, including the following:
- Facilities for cooking
- Broadband WiFi that is lightning fast
- Ergonomic furniture
- Cleaning, security, and upkeep
- Information technology (IT) devices such as printers and scanners
- Booths for meetings and conference rooms
- Caffeinated beverages
- Snacks such as fruit and cookies are provided complimentary.
A flexible workspace saves a start-up the bother of furnishing a typical office, is less expensive – at least in the short run – and appeals to those fickle snake people.
Flexible offices permit rapid expansion (or contraction), sparing you the agony of bargaining with a landlord.
Additionally, coworking spaces connect you with like-minded entrepreneurs who are just beginning to scale their small enterprises. This enables on-demand sharing of battle tales, best practices, and networking tips. And these bonds with your peers may last a lifetime.
These intangible advantages, networking, and social interaction appeal to younger workers, particularly in an era when staff recruiting is the number one issue for growing organizations. LABS, a serviced office provider, organizes free yoga classes, jogging clubs, TED-style speeches, and social activities.
“We’re seeing an increase in demand from start-ups to small-to-medium-sized businesses and even enterprise businesses,” Robinson adds. While some businesses will always need a regular lease, this tendency will continue as more and more spectacular sites become available.”
Advantages of co-working
One of the attractions of co-working is that it lets you to work in a central location without high upfront costs or long-term commitments. The office has already been kitted out. Expenses such as office furniture and renovations are included in your rent, as is electricity, high-speed internet and other utilities.
Cushman & Wakefield says that the average cost of renting flexible co-working in London is more than half the cost of traditional space.
WeWork says that worldwide, a company of four individuals can save 35pc on average over traditional office leasing.
According to IWG, 65pc businesses say that flexible workspaces help them reduce both capital expenditure and operating costs.
As we have seen, flexible offices enable you to expand or contract quickly without capital outlay. When you are growing quickly, it is easy to upgrade and move into a new space. Most co-working leases are for one year only with a six-month break clause, and many offering rolling monthly leases.
Many new tenants signing the lease on a traditional office do not realise how much they have to do: fit carpeting and run ethernet cabling, install a kitchen, create meeting rooms out of what is essentially an empty cube.
Pearson says: “In order to take a traditional lease, you need a significant amount of capex: your traditional office is vacant with a metal floor and metal ceiling but no walls and no carpet, no meeting rooms. You almost need to build it from scratch. It’s a big project. You don’t want to be fitting out a whole office if you’re only going to be there for a few years.”
Co-working allows you to concentrate on getting your business up and running, provides 24/7 support and invoices you monthly, taking care of everything else.
Robinson says: “As well as the flexibility to both upscale and downsize without having commitments of a long-term lease, flexible workspaces such as LABS manage everything with the convenience of the single invoice, taking away all the headache about business rates, cleaning, utilities, security, etc.”
CO-WORKING SPACE – PROS AND CONS
|Expensive in long-term
|Fixed monthly fee
|Lack of space
|Lack of privacy
|Can be noisy
Disadvantages of co-working
The plain reality is that the cost of adding desks to co-working spaces continues to rise. And, even with the same cost per person, a typical office can provide double the area per desk.
Some co-working space residents have complained about unexpected rate increases and opaque monthly payments that carry over from the previous month — and the next.
How do you determine which is the superior value?
With a serviced office, it’s simple to determine an all-inclusive set fee per desk + VAT.
When it comes to a typical office, the rent, rates, and service fee are calculated throughout the lease term, plus capital expenditure and dilapidations at the end, minus the rent-free time. Divide by the total number of workstations for the semester.
One complaint leveled at the co-working space fad is that many of them are converted from typical offices, with service providers attempting to jam as many people in as possible.
According to Savills, WeWork operates at a rather high density, necessitating sharing amenities such as kitchens.
One of the reasons flexible working has exploded in popularity in London is because so many businesses with less than 2,000 square feet have been transformed into private houses.
Certain workplace suppliers have emulated the low-cost airline model by increasing the number of available workstations to uncomfortably high levels. Renters say that office building planned for far lower headcounts are bursting at the seams. One member of a flexible workplace reported that its desks were 20cms narrower than typical and that its coworking spaces were getting more crowded.
Is this the correct image?
If you operate in a more stuffy industry that demands face-to-face encounters with clients, a co-working environment may be too casual for you.
While some co-working locations allow for the reservation of conference rooms, you cannot always be certain of total solitude. Numerous other individuals will almost certainly be present, deterring sensitive consumers.
A fashionable co-working space may not be the best fit for your business. While flexible office firms like WeWork and Spaces prioritize fashionable design, the emphasis is on their brand, not yours.
Distracting to a fault
The bustle created by coworking spaces might be distracting. If you want monastery-like silence, the noise or even low-level hum of continual activity may not be appropriate. A co-working space may be less productive than an isolated, private office if you struggle with concentration. It may be annoying to have several people cheer when scoring ping-pong.
TRADITIONAL OFFICE – PROS AND CONS
|Responsible for fit-out
What’s better – co-working or a traditional office?
According to estate specialist Savills, co-working spaces are ideal for developing businesses, but a conventional office is preferable once they achieve a steady workforce.
“It’s not so much about scale as it is about growth,” explains Cal Lee, head of Savills’ Workthere solution. How rapidly are you expanding? If your business is expanding at a pace of more than 25% year after year, it makes more sense to stay in a flexible location. You may remain in a flexible space till you have 500 or 1,000 workers.”