Is 2019 a year of opportunity for coworking spaces, or is it a year full of questions for the industry? The Global Workspace Association’s Advisory Board—Scott Homa, Casey Godwin, Tracy Wilson, Christopher Campagna, Michael Everts, Jack Richer, and Lucia Diana—sat down to discuss the trends for coworking in 2019. While each of these industry leaders brought different perspectives, all agreed with Homa’s assertion that coworking continues to be “the hottest topic in the office market right now.”
Here are the topics to watch:
1.New Management and Revenues Structures
As coworking giants like Regus and WeWork are scaling their businesses, Homa pointed out that the relationships between space operators and landlords are changing. Emerging models have included management agreements instead of leases—offering a closer relationship between landlord and operator, and also opening up far more flexibility for the coworking spaces with such agreements. With this change has come new revenue-sharing models, making the owner/institutional level of coworking an important part of the industry to watch.
This shift has also seen a rise in hybrid spaces, including “swing spaces,” designed space, and shared amenities, Godwin pointed out. Campagna also added that his company, like many others, is seeing more and more opportunity to work with larger companies who are interested in moving into some kind of shared office setup—a different kind of partnership than has been standard for the last several decades.
While these new forms of shared space/service demonstrate the continued evolution of the industry as a whole, they are also difficult to track. This difficulty can lead to issues determining the saturation of a given area, and finding a way to address that problem is likely to be on the forefront of industry development this year.
Godwin also cited the increase in “opportunity zones” as a potential opportunity for coworking spaces. Opportunity zones are at-risk areas of cities across the U.S. whose governments—whether state, local, or federal—are offering incentives to investors who build their businesses there with the intent to stay for a more extended amount of time.
Because coworking spaces can offer such a variety of office space solutions to the businesses coming into these areas, they can be a worthwhile choice when deciding where to locate a new space.
3.Parking and Density Issues
While some coworking operators, such as Everts, have tapped into suburban markets that know little about coworking at this point, many urban spaces are facing significant challenges resulting from the density of their population. Diana cited elevators as an issue in a space she has used as part of Verizon’s growing trend toward using shared office space. Several of the board members cited parking as an increasing problem for their businesses.
She also pointed out, however, that high density can work to the space’s advantage. While it may not solve parking problems, she explained that in the case of the elevator issue, the space was able to negotiate to have more building elevators transferred from other tenants to them because of the density of people coming in and out of their space. Finding creative solutions to problems like these will likely be a significant part of industry discussions for 2019.
4.Accounting and Investing
Perhaps foremost on everyone’s minds—regardless of whether they’re in coworking specifically or in a related service industry—is the various accounting and investment related shifts in the industry. Godwin cited changes to FASB regulations and property valuations, mentioning specifically that it will be important for operators to be able to explain the financial side of coworking to landlords in order to continue to get leases.
On the flip side, Diana stressed how coworking spaces can meet significant investment needs for their clients through allowing even larger companies (Verizon, in her case) to put their dollars toward their company’s interests rather than tying it up in real estate or long-term leases. She said that part of Verizon’s shift toward using shared office spaces has hinged on their desire to invest back into technology, which is the focus of their company, rather than owning properties or paying hefty leases. She said it will be important for the industry to continue to communicate and pursue creative investing solutions—both for themselves and for clients—as the market continues to shift.
5.Weathering Economic Downturn
Several of the board members mentioned the inevitable softening of the economy within the next two years and offered hopeful comments that coworking’s versatile solutions to an ever-expanding client base will help the industry weather any economic decline. Recent predictions place coworking as poised to replace most if not all of the small and medium-sized office space within the next ten years, and as coworking has risen to the challenges of such high expectations, they have also positioned themselves as a worthwhile investment for companies especially in a changing or uncertain economic landscape.
However, the board also agreed that coworking and related industries would have to continue to be sensitive to changing client and economic needs in order to truly stay ahead of whatever economic curveballs 2019 may hold.
6.Curating a Community of Hospitality
Richer discussed the ways in which coworking has come to resemble the traditional hotel and hospitality industry—a trend he and other board members believe will continue to grow. Just like hotels tend to brand themselves based on the types and levels of services they offer, so coworking spaces will likely to continue to brand themselves based on specific community environments, amenities, and services they can provide.
Diana said that the variety that comes with the “niche-itization” of the industry is good for clients—and creates a need for many providers. Spaces to meet the needs of each client isn’t something that can be filled by a single space, especially when some need customized office layouts, security features, or technological capabilities.
What doesn’t change, however, is the importance of the community managers and their involvement with the clients. “What coworking originally brought was that human interaction,” Diana said. Regardless of how the services of coworking spaces change in 2019, the focus on interpersonal connection in a coworking space will continue to be a critical part of a space’s success—no matter its longevity or size.