Co-working premises have flourished in cities in the last few years: CBRE estimate about 4% of the central London stock is now co-working space while property guru Anthony Slumbers predicts that 40- 60% of all workplaces will ultimately become co-working spaces.
Providers such as Second Home and WeWork offer a mix of hot-desk space and allocated rooms to members (not tenants), as well as communal spaces for formal and informal meetings. Usage rights can be monthly, weekly or even hourly, with rights to use more than one building. The Harvard Business Review found that workers “thrived” more in co-working spaces than in conventional offices. In a mix of different organisations and different types of organisations, people are free from office politics, able to work hours that suit them and feel that their work is more meaningful within the co-working community. Second Home’s website states that over 75% of their members have collaborated on work projects, in stark contrast to Regus, where the standard terms for serviced offices expressly forbid working with others without Regus’ consent. Social space is generally about 10 -20% of the total space because community and collaboration are so important.
The impact of so much flexible space has been felt on short lettings. Carter Jonas attribute some of the 10% fall in small leases in London to the growth of co-working. Full repairing and insuring leases are potentially onerous if major works are carried out during a short lease term, so perhaps it’s no surprise that SMEs and freelancers are attracted by the certainty and flexible pricing offered by co-working. But there’s potential for even more disruption to the market if larger tenants move away from traditional leases. KPMG are offering co-working space to their staff and customers in Mayfair, while in Manhattan IBM are said to have taken an entire building – 600 desks – from WeWork direct.
Should landlords start to consider co-working as an essential part of their placemaking offering? Tenants can grow and shrink the space they need while staying with the same landlord or even in the same building, as for Level 39 at One Canada Square in the Docklands. An eclectic mix of people in the building can also help to generate a “buzz” in the reception area and lifts, making the building more attractive for the usual be-suited occupiers. Profit margins can be slim though, and the rapid turnover of members requires a high maintenance budget as well as an ability to generate leads and deliver hospitality services.
Should corporate real estate managers add co-working spaces to their arsenal of options? About 20% of Second Home’s occupiers are large or established companies looking to spot market trends or the new Amazon or Google. And there’s no denying that for staff recruitment and retention the eye-catching fit outs, designed to foster creativity, are a bonus. Finally, these spaces can legitimise hot-desking, with an average of 5m sq per person instead of the British Council of Offices average of about 10m sq per person.
It would be remiss of me not to mention the legal aspects of co-working as well. Members should, if the agreements are drawn up properly, be licensees rather than tenants. However, there’s a real risk that a company with an allocated room in a co-working space could acquire security of tenure under the Landlord and Tenant Act 1954 unless the correct procedures are followed. The agreement with the co-working provider needs careful thought as well, to make sure that occupation can be shared but that it is clear who retains possession. If your staff are in co-working premises, be alert to intellectual property rights from any collaborative projects, as well as to data security and confidentiality issues.
Do you remember when people used to smoke in offices? Only time will tell if the co-working trend will make our current working practices seem as outmoded as lighting up a cigarette at a desk.