The corporate workspace landscape is undergoing a radical transformation, driven by the seismic shifts caused by the COVID-19 pandemic. The traditional hierarchy, where decisions flowed from the top down has been upended. Employees are now exerting influence on employers, reshaping expectations and fundamentally altering the dynamics between landlords and tenants. With this idea in mind, here are the top takeaways from the Yardi special report, “Coworking and the New Corporate Office.”
Office and Coworking by the Numbers
As the impact of COVID-19 gradually diminished, the state of the office leasing and shared space markets became essential to understanding coworking’s influence. JLL characterizes the office market as “durable” and “resilient” in their April report, indicating signs of recovery after a late-2020 downturn. Despite a modest decline in occupancy in the first quarter of 2022, the office sector gains clarity on users’ longer-term space needs amid solidifying hybrid work models. While coworking faced challenges during the pandemic, a Deskmag survey shows a gradual acceptance with 79% of coworking space providers describing their situation as “good” or “satisfactory”. Furthermore, although 2021 witnessed profit drops, optimism prevails, with expectations of increased membership, higher revenues and expansion among providers. Also, the current revitalization promise is expected to lead to growth across all sectors, however, emphasizing the influence of evolving engagement rules.
COVID-19 and Corporate Occupiers
The impact of COVID-19 on corporate office strategies has been profound, reshaping traditional decision-making on space management. Scott Morey, WeWork’s president of technology and innovation, notes a shift from occupying vast spaces to solving the challenge of implementing flexible work models without sacrificing in-person culture and collaboration. Many companies now prioritize giving employees a say in their work locations, with 53% opting to let them decide their return-to-office timelines.
Face-to-face collaboration gains importance, driven by the understanding that in-person interactions foster innovation and social ties crucial for career advancement. To support this, hybrid work models have evolved strategically, with shared spaces becoming tactical resources for small teams. Furthermore, talent competition is a driving force behind the embrace of greater work flexibility, as seen with a tight labor market demanding flexibility in work arrangements. Key indicators, such as U.S. employers struggling to fill 11 million jobs, highlight the shift in executive attitudes toward more flexible work arrangements, putting job candidates in the driver’s seat. This evolution is further illustrated by corporate responses to talent needs, as Warren Hersowitz, Yardi Kube’s Miami-based manager, emphasizes remote work options for team members in response to the changing landscape.
Getting Strategic
Amid shifting dynamics, a growing number of property owners and managers are recognizing the considerable benefits of coworking, marking an evolution from historically tense relationships. The perception of coworking as a millennial-focused option with free amenities is giving way to an understanding of its value as an incubator for startups. Landlords now acknowledge that small businesses often use coworking spaces before transitioning to larger, dedicated spaces.
The concept of flexible offerings positively impacts property occupancy, providing tenants with desired flexibility and acting as a safety net amidst market uncertainties. Joint ventures between building owners and coworking providers have become a significant trend, evolving into strategic partnerships focused on mutual benefits as they involve shared risk and startup costs, while also offering cost savings and flexibility to coworking tenants.
Cultural Considerations
Joint ventures (JVs) in coworking are increasingly common, and often handled on a building-by-building basis. The option of joint branding with property owners is considered, but established names like Industrious, WeWork and Regus are likely to remain the more attractive option. The focus on branding extends to creating a compatible corporate culture in shared spaces, emphasizing amenities and technology. And despite aesthetic differences among coworking operators, the emphasis remains for all on curating productivity and employee satisfaction.
Furthermore, COVID-19 has reshaped coworking dynamics, with some urban centers recovering while suburban areas gain significance. As The New York Times describes it, this trend of workers seeking occasional offices for a distraction-free environment which reflects a shift away from daily central business district commutes.
Blurred Lease Lines
The increasing demand for flexibility among corporate space users is not only driving more coworking JVs but also prompting landlords to relax traditional lease terms. This shift marks a transition from leasing as a product to leasing as a service, with the goal of capturing companies throughout their entire lifecycle. Landlords are adapting to potential space cutbacks as occupants prioritize flexible leases, shorter term contracts and amenities. As corporate occupiers focus on meeting expectations, regardless of whether through coworking agreements or traditional leases, the lines between the two become blurred, with space providers having no choice but to adapt according to their needs.
Automation and New Realities
The coworking industry is leaving behind traditional tensions and its 1980s reputation, now emphasizing a blend of digital efficiency and the human touch in curating flexible office spaces. Larger corporate occupiers leverage dedicated teams for automated searches and personalized design solutions, while smaller clients may opt for automated searches or personalized services. The focus has shifted to meeting specific needs, easing the space search for both occupiers and providers. Fortunately, advanced platforms, like Yardi’s CommercialEdge ILS network, offer comprehensive search options, reflecting the ongoing evolution of the workplace and making it easier for all involved to embrace it.
Yardi Kube is an all-in-one coworking space management platform that helps businesses manage all aspects of flexible workspaces, from meeting room and space booking to lead generation, payment processing and more. For more information, click below to schedule a demo.