Anatomy of Co-Working Spaces
Are you the Owner of the Co-working space? Are you the Founder of a future unicorn? Are you a Freelancer? Or Are you a part of a Big Corporation?
It's the beginning of 2020 and the term 'co-working space' or 'shared working space' is no longer alien to us. The year which we have just left behind saw 1688 new shared working spaces open globally, which in turn have created a sum of 18,287 such spaces on Earth. The industry which is witnessing 9.5% growth year-on-year has been projected for a market valuation of $45bn by 2022 in India.
The industry which had been attracting the attention of startups earlier is glittering more brightly now and has started to attract big corporations towards it. Is it just a fad? Or is it something that is going to change how we work? It sure is making these Real Estate giants turn their eyes and look in surprise as to how these co-working companies are changing the commercial space.
THE TREND
These shared working spaces have been facing operational challenges when they have to hire managers to help members popping in any time of the day. However, the trend is shifting towards an automated approach where co-working space management software is helping them with booking meeting rooms, managing attendance, time tracking, automated invoices et Cetra while reducing the personnel costs. When more and more people have started preferring Work from Home, but with the unavailability of the required infrastructure, they will opt for shared spaces that are available at more than one location. This will be time for co-working offices to grow a branch to a new place or city which can allow something like a passport program for members so that they can pop in at any participating co-working spaces. Since these shared offices provide a cost-effective solution to start-ups, some of these co-working offices have started giving out of box services like CA for start-ups, bank tie-ups for loans, babysitting, etc.
One good reason for people to flock into these shared offices is a good space design. This will lead the co-working companies to focus on niche segments like writers, architects, photographers, etc where they can get access to facilities which a professional would need. With the undergoing shift of co-working companies foraying in co-living, a new trend has started to get included in these spaces like weekend sessions of meditation or yoga classes. This will definitely enhance the list of offerings provided by them.
THE BUSINESS MODEL
A Co-working space primarily targets individual freelancers and enterprises like startups and corporates. This target group is shifting from a traditional workplace to a shared workplace especially because they do not want to pay high rents and engage in a long-term lease. These co-working spaces are giving flexible price points as per requirements, on-demand workplace, ease of working from different places, a community atmosphere, quality of facility which does not lose out to MNCs and service partnerships for the members. In the case of big-ticket clients or corporates, these co-working companies have a dedicated Relationship Manager to address any issues faced by them. They prefer to have an Onsite support & service team to ensure members have a hassle-free experience while working on their premises. In this time when everything is available online, it is important for them to maintain a website where potential clients browse through the information of their office and a Call-to-Action like a 'Schedule a visit'. For the members, they are giving access to an online customer portal where they can manage their accounts, make necessary payments, etc. To grow their community, they have a referral partner who forwards them leads. They need to take the property on lease for which they partner with Real Estate companies and find a strategic location. For services like high-speed wifi, printers, pantries, mail distribution, etc., they need to have good service partners in place.
With such a customer-centric business model, the companies have to bear high costs which include:
- Property portfolio development cost
- Lease & Acquisition cost
- IT infrastructure management cost
- Professional services cost
- Retention of personnel
THE BENEFITS
The shared working offices can create a balance of less stuffiness of corporate offices and more structure than home offices. For people being surrounded by other hard-working professionals, it gives a boost of motivation and increases the productivity of employees. These places do create a sense of community, where one can meet many individuals that can serve as resources. It helps bolster the businesses of clients through fostering connections across the workplace. As the new space designs are being built that promotes healthier and more relaxing working environments, it is helping create a better work-life balance with offerings such as pet-friendly offices, yoga studios, etc. For smaller or new businesses, renting an office space can be a daunting task with long term commitments and hefty deposits whereas a shared working space gives different options of memberships, comes with already established infrastructure which a professional would need and one does not have to take the headache of utility bills or service providers. As the new co-working spaces are coming up every day, these remote working locations are helping employees reduce commute time, thus leading to a happier feeling of working at the office.
THE CHALLENGES
One of the major challenges of co-working companies comes from operational costs which have to be optimized without compromising service standards. For standardized offerings, they need to minimize the turnaround time for the resolution of clients' issues. As per the JLL global survey conducted in 2019, the number of individuals or companies opting for a co-working space in rising but only 40% of all spaces are profitable. Due to the high churn rates and high competition in the market, startups tend to move from one shared space to another, depending on cost-saving. It causes instability in the revenue and the co-working companies have to maintain a minimum level of occupancy to stay profitable.
Where the startups are looking for flexible and short-term lease, the co-working companies have to get into long-term agreements with the landowners to ensure the latter does not sell that space without adequate notice. Landowners have moved from a fixed-term rent agreement to a Revenue-Sharing model with the co-working companies which means the landowners will earn a share from the revenue generated by these companies. However, due to the high churn rate of start-ups, it generates lower returns for landowners leading to a strained relationship between both the parties which also becomes a factor for renegotiation of terms for contract renewal. Many of these shared working spaces have to offer 24x7 facilities for which they need to ensure power supply and availability of security & admin personnel, leading to increased people cost. For non-stop power supply, they have to spend more on making sure that energy is not wasted. One problem which comes to maintaining efficiency with lots of seats is that it's not always possible to know which seats are occupied and which are not.
THE TECHNOLOGY
To overcome the operational challenge of managing the co-working space and to use the facility efficiently, the companies are opting for co-working space management software. The market which is growing at 11% CAGR provides competitive players which are helping these shared working spaces to reduce the costs and increase customer engagement. EngageApps, a leading player in the Indian Market is helping the companies by providing features like Booking meeting rooms, Visitor management, Members directory, Door access management along with a dashboard and analytics reports for the co-working companies. With the space management software, the co-working companies have access to knowledge about which services are being used by the members and can decide how to allocate resources efficiently.
Are you still being forced to make a decision of working from a Corporate office or from the comfort of your HOME? The transformation of the workplace has begun and will see further changes as the lifestyle of people evolve and technology advancement takes place.
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