What Will Covid-19 Mean for Coworking?

Business models will have to adapt, but flexible space will be more valued than ever

May 2020

Words by Katie Puckett

While the WeWork model of an informal ultra-high-density community is not compatible with COVID-19, the flexibility that coworking has brought to the market very much is. Coworking spaces in their current form were born after the carnage of the global financial crisis and flourished as a home for the newly redundant and entrepreneurial. But it wasn’t start-ups and freelancers that propelled the global flex space sector to annual growth of 31% between 2015 and 2019 (source: JLL). Corporates started moving in, initially to profit from the feverish exchange of ideas, then on a much larger scale, to benefit from short-term leases and no-hassle premises under the space-as-a-service model.

"Flexible space has become an integrated part of portfolio strategy so we’d expect that to continue"

Tom Carroll, JLL

Coworking business models will need to adapt, and the post-COVID market may look different. Tom Carroll, JLL’s executive director of EMEA research and strategy, has been tracking the dramatic rise of coworking and flexible space over the last decade: “In the short term, there’s quite a lot of pressure on that sector as lockdown has had a very tangible and real impact on occupancy within open coworking and shared space,” he says. “That’s going to put pressure on some operators, and we expect consolidation and some shifts as that shakes out.”

But agility will remain a significant driver for occupiers: “Flexible space has become an integrated part of portfolio strategy so we’d expect that to continue. In fact, we may quite quickly see a requirement for teams to set up or to leverage more flexible space solutions, even in the re-entry process and certainly as we move further forward. In the long term, we’re only going to be seeing more flexible, agile, dispersed and distributed work and portfolios.”

Bill Kerr, professor at Harvard Business School and co-director of its Managing the Future of Work initiative, thinks that the impact on coworking operators will depend on how successfully they can present themselves as healthy places. “Some coworking spaces have set themselves apart as having world-class facilities. Historically that’s been defined in terms of computing infrastructure and office furniture and peanuts and perks like that. I think increasingly they will also be defined in terms of the quality and health of the environment.”

As technological solutions such as temperature scanning and contact tracing develop and become more widespread, some workers may seek out places that implement higher levels of monitoring. “Coworking spaces could be very forward-leaning in terms of creating some of those work conditions, so it almost becomes a safer spot.”

"Coworking spaces will increasingly be defined in terms of the quality and health of the environment"

Professor Bill Kerr, Harvard Business School

This could become a strategy for managing elite talent. “Imagine a professional sports team with players that are paid $10-$20 million a year. If one of their stars goes out, that’s going to kill the team. That seems like an environment where you might put in place extra checks and technology to monitor any level of exposure that the players could be having. You might find that’s true in some of the most elite investment banks. We’ll see people experimenting with this to keep employees healthy, especially where their talent is exceptionally valuable and business-essential.”

Coworking will continue to influence traditional office space, as all leases become more flexible, with expansion and contraction clauses to allow occupiers to flex the amount of space they have around a core requirement. After the Christchurch earthquake in 2011, “no access in emergency” clauses began to appear in leases in New Zealand. “The landlord agrees to abate a fair proportion of the rent during a period when the tenant cannot access the premises, for a variety of reasons including earthquake, flood, pandemic,” explains Michael Holloway, general manager of property investment at Kiwi Property, one of New Zealand’s largest real estate firms. “There’s a debate to be had about what ‘fair proportion’ means, but I could see that well-advised tenants elsewhere in the world will want to build in these kinds of clauses.”

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