It was recently announced that WeWork, the global coworking chain, has signed a deal to manage an entire office building for IBM in Manhattan. Up to 800 employees will work in the building, which WeWork will manage as a single shared office environment. At first glance this looks like it is just an extension of its recent strategy of providing work spaces for employees of large firms, but it might also signal something much bigger.
Concurrent with this news was the announcement of a new Enterprise division within WeWork. While it is unclear what the specific terms of the IBM deal will be, it seems that these enterprise deals might signal the beginning of a lease-free model, wherein the value-add of the company is in the management of the space. We are seeing lots of ‘management fee’ arrangements in lieu of straight leases, and it would make sense that this is what the company is aiming for. It seems like only a matter of time before the weight of SO many leases becomes a heavy burden.
But that isn’t the main point here. Rather, what is interesting (and important) about the WeWork announcement is the shift towards enterprise. Retail coworking, which is for the most part what the world has seen thus far, is just the first iteration of a much large shift from old ways of working to ‘new ways of working.’ All of those brave pioneers who made coworking what it is today, such as Alex Hillman and Tony Bacigalupo, have opened up the floodgates for a new wave of adoption to follow the retail coworking phenomenon.
Three years ago, before we began working primarily with real estate developers seeking retail coworking solutions, we set out to do enterprise coworking. For us, the big opportunity has always been the potential to ‘convert’ large firms to the culture and flow of coworking. Not only is this a big business opportunity, it would seem, but it also potentially can serve to liberate corporate employees from uninspiring spaces and rigid workplace policies.
Workplace Strategy Insight: In these times of innovation, coworking is emerging as the new office.
We help companies cowork. Coworking has been the preferred office of choice for the independent worker since the community office trend began to emerge in 2006, catalyzing the disruption of the traditional workplace strategy model. Since then, the coworking phenomenon has grown at an accelerated rate in parallel with rise of the independent workforce. Today there are 50 million+ people in the USA working independently who office from home, a coffee shop, or a coworking space. Work has truly become an anytime/anywhere affair. As the coworking industry continues to mature and the corporate environment innovates, the two worlds are forming a symbiotic, albeit experimental relationship. Companies and employees have both begun to hear the buzz around coworking and have been curious how they may ‘do coworking.’
Even so, most company employers don’t know how to integrate coworking into their workplace strategy and most company employees are not aware that HR department rules on workplace flexibility are quickly evolving, making it common practice for companies to encourage mobile working.
As more companies test out coworking it’s causing the industry to evolve to support them. In fact, as reported in the latest 2016 research by Deskmag, this is the first year on record where company employee members (51%) outnumbered independent worker members (49%) at American coworking spaces.
How companies can test out coworking as part of their workplace strategy
Option One: External Coworking Strategy
Sponsor company employees to work in existing coworking spaces. Companies that have embraced ‘external coworking’ include: G.E., PwC, The Guardian, AirBnb, Pinterest, Red Hat, Automattic, PepsiCo, Microsoft, Merck, Heineken, KPMG, among others.
Picking the Right Coworking Spaces
Picking the right coworking space to match the specific needs of your mobile employees can be a challenge. Different spaces are tailored to different uses. As many cities have numerous coworking options, picking the right one can be a project in and of itself. As the awareness (and demand) for coworking has increased among large firms, it has become common for some spaces to create membership models specific to company needs. Some companies choose to send all their mobile employees to one coworking space in private offices. And some companies allow each employee to choose where they want to work.
Embracing a Culture of Experimentation
Coworking for companies should be looked at as an experiment One of the things that makes coworking spaces so appealing is their no risk, short term obligations. All coworking spaces offer month-to-month memberships. Ask your employees if they would like to have coworking as an option and if they say yes, offer to buy them a short term membership to test it out.
Option Two: Internal Coworking Strategy
Instead of sending your employees out to external coworking spaces, some companies opt to build their own internal coworking solution. Companies that have embraced an ‘internal coworking’ strategy include: Macquarie Bank, BankWest, Rabobank, Microsoft, ERA Contour, Achme Insurance, KPMG, GLG
Start with a Pilot Coworking Space
Take between 5,000-15,000 sq ft of space and repurpose it into a coworking space.
Empower it with data-driven Key Performance Indicators (KPI)
While testing out your pilot coworking space, you must find a way to measure the impact. How do you measure an increase in employee productivity, creativity, innovation, engagement, among other things? These are the KPI’s that will dictate whether or not you should expand the pilot to an entire floor, your building, or company campus.
Why/how does coworking work?
Data demonstrate that engaged employees are more productive employees than their disengaged counterparts, and the data on employee engagement is abysmal. According to a 2014 Gallup poll, less than one-third (31.5%) of U.S. workers were actively engaged in their work, meaning well over half of American employees were not psychologically committed to making positive contributions to their organizations. These figures, according to Gallup, have only declined recently.
To the contrary, data from coworking spaces underscore that engagement, productivity, and energy are ‘through the roof.’ Two recent Harvard Business Review articles speak directly to this. Coworking spaces bring together the 3 P’s of the ‘Open Organization’- people, place, and purpose– where employees work according to their own rhythms on work that is meaningful to them.
It’s all about culture.
The coworking ethos has become the workplace culture of choice in the sharing economy. Yet, the culture of most large firms does not reflect the culture that Millennials are co-creating and want to be part of. Workplace strategies and HR policies are evolving, though, as innovative company leaders embrace the modern workforce and the future ahead.
While some may still aspire to work in a “corner office”, many others are embracing the Workplace of the Future. All over Houston, employers are redefining the term “office”.
What are architects, interior designers, general contractors and project managers being asked to include in their future buildings and corporate campuses? And what will building owners and developers need to provide in order to entice new tenants to move in? Also, what new technologies will companies need to consider adding?
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In the July 13 issue of the Wall Street Journal, two articles sit side by side with no reference to one another. That they are presented as separate stories is both ironic and alarming.
The first article, “WeWork’s Top Rival: Anyone and Everyone,” talks about how WeWork is and will continue to face stiff competition from numerous players, big and small, in the now burgeoning coworking industry. This is simple enough. The article quotes a commercial real estate executive in New York, who says that for now they do not plan to enter the coworking market, but that they are mindful of it.
The second article, “Service Firms Feel a Chill,” discusses the flagging performance of the world’s largest real estate services firms- CBRE, JLL, Cushman & Wakefield, Colliers International, and Savills. The article pins the blame for this poor performance on both the changing nature of the industry and on the macro-economic impact of Brexit. While surely Brexit will impact the CRE industry, particularly in Britain and Europe, that is really only part of the larger picture. For some reason, whether it is a lack of peripheral vision or simply willful ignorance, few participants in the mainstream CRE industry quite manage to make the necessary connections to have a truly holistic view of their own industry.
The first article about WeWork, it might seem, is entirely unrelated to the second article about CRE, but of course it isn’t.
The massive growth of coworking reflects fundamental changes in how people are officing- in small startups as well as in medium and large firms. It decreasingly makes sense for large firms to lease based on the ‘one fixed work station per employee’ model on which the traditional CRE leasing model is based. That is, like individuals in the coworking world, many corporate employees now work ‘in the cloud.’ Sometimes they go into the office, sometimes they work at their kitchen tables, and sometimes they work at their local Starbucks. That such mobility-of which the coworking industry is a huge part- is unrelated to the decline in revenue among the largest CRE firms, is simply not a tenable notion.
Where are these folks coming from? They are coming from companies that are, in a variety of ways, changing the way they use and lease work space. It is a leakage problem for CRE. There are, though, internal solutions. When, we ask ourselves at OpenWork, will large firms (CRE and their clients) put their fingers in the dike and build coworking-like environments where their employees actually want to be?