“Real estate professionals and the media have been waiting for an economic downturn to test the coworking business model for years,” Avison Young’s Michael Kloppenburg said in a NAIOP Advantage Series webinar last month.
While certainly, no one could have foreseen this decline would be triggered by a devasting pandemic, we’re in a downturn nonetheless.
And it looks like coworking has passed the test, according to Kloppenburg.
A lease structure to match the business cycle
In many ways, corporate lease structures are stuck in the past, a relic of an old way of doing business that also involved faxing and printed memos. Today, we instant message, video conference, and upload to the cloud – instantly. Rapid technology and communication have accelerated the business cycle, and it’s likely businesses will expect lease terms to do the same.
Kloppenburg says this isn’t a new trend, but he predicts the crisis will accelerate it, stifling desire for long-term commitments that demand significant capital. Not only are businesses moving more quickly, but many of them will also seek flexibility because they will need to recover from months of disruption.
Creativity in a crisis
Projecting a time after COVID-19 is difficult when now we’re still facing many questions, and when the timing of “the end” isn’t yet clear. But many operators are just embracing creativity, looking for opportunities to renegotiate, convert leases to management agreements, and supporting small businesses with resources. Ultimately, Kloppenburg said, “Retention has been better than expected.”
Now that most people find they do enjoy working from home, according to McKinsey & Company research, which found 80 percent of people say they do, it’s likely many professionals will push to continue to work from home to support greater flexibility in their personal and professional lives.
Businesses can also benefit from greater flexibility in working models. For businesses, flexibility means:
- Fewer recruiting restraints, as talent can be sourced anywhere near a workspace
- Reduced real-estate costs
- A more innovative approach to productivity
Right now, coworking spaces need to rethink operations and ensure they can provide a safe environment, inclusive of social distancing requirements and workspace sanitation.
But it’s not just coworking operators who will need to rethink their current approach – it’s businesses in general. And for large companies with sprawling real estate filled by commuting employees, that rethink is expected to take some time. The average office redesign can take 12 to 18 months, according to a WeWork post published in the Harvard Business Review. The sheer time to redesign, coupled with a reluctance to sit in a cramped train or bus for an extended period of time, has pushed many business leaders to embrace a new, more dispersed approach, that would boost reliance on flexible spaces to help realize that vision.
Brian Armstrong, CEO of Coinbase, told WeWork businesses should embrace future offices that are “one floor in ten cities versus ten floors in one city.”
Moving away from a centralized headquarters can cut costs in renovations and disperse employees to other cities, where coworking spaces can fill a need – right now.
The workspace solution you need, now
A lot about the way we worked has changed this year, but HEXA is ready to meet your business’ new needs. Whether you just want employees to feel anchored with a Virtual Office or you need a private HEXAN Home, we’re ready to meet your new workspace solution needs now – no redesign required. Contact us today to schedule a tour or tell us more about your needs at firstname.lastname@example.org.