Coworking & COVID-19: Will Shared Space Survive—or Thrive?

October 12, 2020 Don Catalano Don Catalano

As the fall of 2020 progresses, COVID is continuing to affect the way that people work. While some companies like JP Morgan Chase are calling employees back and others, like Amazon and Facebook, are continuing with plans to lease large new spaces, others are continuing to allow their workers to partially or completely work from home. Winding throughout this new working environment is the theme of co-working. How will WeWork, Knotel, and other co-work providers fare in this new world?

 

Why Co-Working Works

Everything that made co-working desirable still remains and, in some ways, has become even more important. For companies that need flexible office space, co-working providers offer the ability to scale workplaces up -- and down -- quickly and affordably.  They still offer the ability to have space without having to manage it. Given that COVID has added multiple new levels of complexity to running an office (like affordably sourcing hand sanitizer and handling elevator traffic jams), this service has gotten even more valuable.

 

The unstable nature of working during COVID has added value to co-working environments.  Companies could theoretically drop 60 percent of their desks to accommodate workers who are now spending two days in the office and three days at home. If social distancing is a concern, co-working providers like Regus can office small private offices without construction cost, assuming space is available.

 

Why Co-Working Won't

One of WeWork's greatest innovations was the reinvention of the office pricing model. While most companies thought of their offices in terms of their square footage, WeWork shifted to billing on a per-desk or per-workspace basis. On one hand, this metric is intuitive. After all, your people don't use square feet... They use workspaces.

 

The problem with most co-working models is that the hidden tradeoff is that they offer much less space per person and they do it by either offering large open areas or by packing multiple people into small private areas.  In either case, this arrangement breaks down when you introduce social distancing into the mix.  Given the economics of most co-working spaces, it's too expensive for the co-working provider to significantly de-densify, and it's too expensive for co-working tenants to lease more space.   This Catch-22 means that co-working providers may not have an economic model to support working in a COVID environment.

 

At the same time, the build outs of most co-working spaces are unsuitable to post-COVID needs.  The extensive common area and conference space is likely to sit unused, while the tightly packed offices and, in some facilities, hallways scare germaphobic employees.  Who wants to sit at a communal table when someone's coughing?

 

A Likely Future

Co-working will survive COVID. Flexible office spaces have been around for decades because they serve an important purpose -- as an adjunct to traditional office space. Whether a company needs to house a small field office, handle project-based hiring, or just have a little extra room, co-working will still work. However, a move back to more privacy and more space will reduce the desirability of co-working and make traditional office space more popular. 

 

COVID-19 & CRE guide

 

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