What are coworking spaces and why do we need them?
By Allan Talusan | 29 September 2022
Furnished flexible offices and coworking spaces are the future of work environments
Even before the pandemic, remote/hybrid work has come to the forefront of business culture. This new way of doing work has become the new normal. Modern companies must adopt new concepts and technologies to compete for talent and resources – from work-life balance perks to sustainability, diversity, and inclusion to the work environment. From this perspective, coworking spaces, made famous by companies like Regus, WeWork, and Liquid Spaces, have become a popular trend that compliments the flexibility companies try to achieve. Companies searching for office space for rent have flexible workspace options for their consideration. Flexibility is at the core of coworking space.
Coworking space may not be intuitive to many people – imagining a space where people can walk in and occupy office space amidst employees making a loud noise collaborating in the open environment. But once the system and concepts are experienced, it makes excellent sense as a productive and proactive shared workspace for innovation and collaboration. But how does coworking space work, and why is it adopted by so many businesses today?
Coworking space may at times appear chaotic, but in fact, there is a strong level of organization for these systems. The flexible office space is optimized for productivity, utilization, and management. Many business models implement coworking offices as the right amount of office space people need to get their work done in a friendly environment. Coworking space addresses a company and its staff’s work-life balance.
A Coworking Office Primer
So precisely what is a coworking space? A designated workspace that supports people, often from different companies, to work on their individual and collaborative projects.
Coworking is a concept that goes beyond simply the office space a company requires. It is, at its core, a commitment to unite people and teams to accomplish their company goals. A coworking space can include several employees from a large firm or startups and freelancers looking to work and network. People traveling for work and even remote working individuals seek flexible office space as a home base for their operations. Coworking creates momentum for business in a casual business environment. All flexible hybrid workspaces and shared offices contain the same accouterments as corporate offices and then some – business-grade internet, printers, reception, meeting rooms, and even complimentary premium coffee and tea. According to Wikipedia, coworking is “the situation in which several workers from different companies share an office space, allowing cost savings and convenience through the use of common infrastructure, such as equipment, utilities, and receptionist and custodial services.”
Today, workspace-as-a-service is a sustainable and lucrative business model from large urban markets to small towns and islands like Grand Cayman.
Different types of coworking space
A remote worker has different options when it comes to hot desk options.
Coworking and open workspaces have been synonymous for many years. In an open workspace, there is a mix of hot desks (available desks for use by different patrons) and dedicated desks often leased by small companies with few employees. The members of an open workspace are often comprised of various companies sharing common work areas.
Larger teams have different office needs. Many times, an open workspace will not be suitable for them. They seek the opposite, offices, and suites for the sole purpose of a single company. Traditional retail office spaces for lease are more inclined to rent out private workspaces.
Some coworking spaces, whether open or private, cater to companies from a common industry. Think healthcare startups or creative think tanks, for example.
Incubators are run by venture capitalist firms looking to provide workspace and funding to startups in exchange for equity in the company. These are very popular in technology-driven places like Silicon Valley, Austin, and Charlotte in the United States.
Space Management and Utilization
It is not just pure luck that a coworking space occupies near capacity for an optimized revenue. It requires a thoughtful infrastructure with smart business goals. Every single seat is accounted for every single day. Most coworking spaces need coworking members and walk-in patrons to check in at the front desk with a coworking admin. The admin then sets up the patron’s assigned workspace. Using coworking platform software enables the coworking space to measure space utilization, occupancy, and revenue in real time. An admin can also see which kinds of workspaces are most and least popular, the industries of the patrons, and with a bit of research marketing, the companies and customers to target and attract.
Monetizing Workspace-as-a-Service – The Membership Model and the Walk-in Patron Model
Like a Planet Fitness membership, coworking spaces sell memberships to gain revenue. A membership model provides reliable, consistent cash flow and can be automated to withdraw from a member’s checking account. For companies, membership costs include furnished offices and instant turnkey business technology like business-grade Internet, printers, and front desk administrative personnel.
Coworking membership may oversell a coworking space’s capacity. Like Planet Fitness, coworking space relies on the consideration that not all 100+% of its members occupy the workspace 100% of the time. For example, a coworking space may have a capacity of 180 seats but sell as many as 210 seats (117% capacity), anticipating only 140 members (78%) on average coming into the office.
Members can come in the form of a walk-in paying significantly larger fees for usage than a regular member paying monthly or annually. The reason is to incentivize the member to invest in recurring full memberships to get a better ROI on their workspace budget. A regular full member may pay $300 per month for office usage, while a walk-in member may pay $300 for a week’s worth of daily walk-in visits.
Remember that 77% number that a coworking space may forecast for daily occupancy. Well, the remaining 23% of seats could then be released for walk-in members. Revenue is higher from the walk-in patrons but regularly paying customers help drive consistent income throughout the year. The more walk-ins a coworking space fills its seats with, the higher the margin it will make on that day, but the more unpredictable and variable revenue becomes. This combination of full membership and walk-in a la carte patron builds the revenue model of the coworking space.
Space management is the solution that coworking space offers businesses. Modern companies and their employees strive for optimal work environments that are responsive to their needs and provide strong organization and management. Once that architecture is set in place, the coworking space becomes an asset that helps draw talent to companies consistently and reliably.