16 Jun The Future of Coworking – 3 Things I’m Thinking About Every Day
People are hell bent on figuring out what the next big thing is, so here is my opinion on the matter. These are the big trends I see in coworking over the next few years.
Market Corrections and Salvaging Sunken Ships
I wrote recently about market corrections. I and many in the industry share the view that leasing is a losing game unless you get an incredible deal, which is rare if not impossible in many larger markets across the US. Even if you do secure a deal, the mental headaches that can come from getting property owners to put in the TIs necessary to bring a property up to par often aren’t worth it and can account for multi-year delays (as we encountered with Impact Hub).
If you haven’t secured a great deal, when markets correct downward, you are stuck in an impossible position. If you keep your rates the same, members will leave for less expensive spaces. If you lower you rates you’ll be under water.
Spaces will close up shop when this happens. Other savvier brands and investors will likely “buy” the failed spaces. However, they won’t actually pay money for them in most cases (news flash: nobody pays money for a failed business). They’ll just assume the liability, re-negotiate the lease, and acquire all your members. That means little or no money for all your hard work.
I advocate for avoiding leases altogether (again, unless you get a killer deal). I advocate for partneroing with a building owner instead.
The opportunity during the market correction is to be in a financial and operational position to salvage some sinking ships when they start going down, then add them to your own network.
The rise in popularity of this industry has been almost explosive. Brands like Remote Year, Wifi Tribe, Roam, and many others are quickly turning a profit because of incredibly high demand. For whatever reason, the market is now ripe for this industry.
There is a huge opportunity to diverge from the Remote Year business model and innovate. For example, focusing on specific audiences would be a great way to innovate (see the next section for more on niche coworking in general). Another fantastic way to differ from the established brands is to do quarterly or bi-annual expeditions instead of monthly. I also wrote about this in a recent article.
The big challenge here, for those looking to create a travelworking brand, has to do with real estate inventory. My friends in this industry are having a difficult time finding properties that can house large groups of people because many property owners/managers in touristic locations are used to commanding hotel-like rates, as opposed to long-term rentals. The good finds are getting harder and harder to find as more competitors enter the market.
This leads to a massive opportunity for real estate development and acquisition in some fairly inexpensive markets around the world. Invest in the development of or acquisition of hostel-like properties to house large groups of people. This is not the same as entering the hostel/hotel industry. The difference is that most hostels wait for people to book for vacation and do nightly rentals, much like a hotel. Travelworking brands who acquire a permanent property are creating a consistent pipeline of customers who are then being funneled through properties. In fact, this industry is approaching it’s market the way coworking spaces ought to be approaching their market: customers first, spaces second. Property acquisition for these brands is the best way to reduce risk and volatility.
Startups are boring. Freelancers are boring. Coworking is boring.
I say this because, as it stands today, coworking is too generally focused. Startups and freelancers are not a sufficient audience to market to. The audience just isn’t narrow enough to be meaningful to anybody. This is largely due to the huge influx of coworking brands focused on startups and freelancers. If you’re the space for startups, so are 20 other spaces in your city.
Enter the era of niche coworking.
Imagine the shared workspace focused solely on food. Food tech, food prep, pop up restaurants, catering, test kitchens, community kitchens, banquet space, etc. There are daily deliveries of fresh kitchen staples for all to use. There are spices for all to use. There is expensive commercial kitchen equipment for all to use.
Such a space wouldn’t just be a rebranding of the commissary kitchen (though that would be useful as well), but would be a complete overhaul of the industry because the model includes professional workspace and meeting rooms just like a typical coworking space, plus culinary events and programming. Anybody interested in doing a food startup or investing in a food startup will only be interested in going to this space.
Apply this to any industry you want: beverage, art, light manufacturing, government and politics, fashion, writers, graphic designers, etc.
Niche coworking flies in the face of the idea that people go to coworking spaces to drum up business and network for services they need. I personally don’t believe people do these things unless they are sleazy salespeople. People do coworking because they want to work alongside and hang out with people like themselves.
In fact, travelworking (above) is really just a form of niche coworking. At the risk of going too Inception-esque on you, check out this niche within this niche.
Hence, niche coworking is the future. I’d bet my reputation on it.