The popularity of flexible workspaces is growing and the industry continues to evolve in exciting ways; we’re seeing a lot of innovation in how providers meet market demand.
Consolidation and diversification similar to the hotel industry’s brand strategy are on the horizon, with flex operators attracting users with customized features and amenities that make sense in the real world. Best of all, there’s plenty of room left for new providers; the industry is barely scratching the surface when it comes to catering to the overall influx in demand for flexible-term office space.
But even as large office landlords turn to flex as a solution to historically low occupancy rates, it may take them some time to fully compete with the community programming and hospitality-infused space elements that many coworking operators are already knocking out of the park. Flexibility and creativity will be critical skills for turning challenges into opportunities in this pivotal year.
The 3 biggest opportunities for coworking operators
- Educating new members and companies
Many still think flex spaces are more expensive than regular offices and are only for small and medium-sized businesses. A data-driven approach can counter much of their objection.
Remind them that coworking space can save as much as 25% per employee over five years. Point out that traditional spaces also have expenses that go into creating a welcoming working environment for employees. Whether it’s a traditional office or a flex space, you still have expenses like furniture, design, office equipment, internet, utilities, pest control, cleaning fees, insurance, taxes, management fees and more.
Back in 2007, flexible office space was new in the marketplace. By 2017, coworking was where all the new and hip start-up companies wanted to be, and they looked at traditional office space as old and stuffy. Today, nearly every small to major Fortune 500 company has considered or is already using flexible office space in some capacity.
- Consolidation and loyalty programs
We believe the industry is consolidating, similar to the hospitality/hotel industry. You’re starting to see companies having multiple brands under the same umbrella, as Hilton and Marriott have in the hotel industry. We could end up with a “big five” group of players that account for most of the spaces, and your strong mom-and-pops will still be around.
Just as the big hotel brands offer unique rewards that make people loyal to them, successful coworking brands will keep users coming back with the features they need to create a productive workday: great locations, private spaces, fast Wi-Fi, coffee and beverages, flexible terms, and reciprocity. Just like there are unique restaurants to fit any diet, there are a variety of coworking operators to fit any workspace appetite.
Sooner or later, of course, it always comes down to the budget.
- Balancing cost and customer needs
There is definitely a need to find balance here. It can be tempting to offer the latest and greatest amenities just because you’ve heard they’re popular – and equally as tempting to yank a feature because you think you can’t afford it. It’s best to poll the members and invest in perks that matter most to them instead of ballooning your costs by offering everything under the sun.
As soon as you elect to cut costs and take away a perk, the perception from members is that they’re getting less value. So, it is essential to communicate to your customers – in this case, you can’t over-communicate – to help them understand what makes the most sense to include for no additional cost.
This is where the Hilton/Marriott analogy comes in again. When you stay at a Courtyard or Residence Inn by Marriott, you expect something different than at a Ritz-Carlton or St. Regis property. The hotel industry created star ratings so consumers can understand what they are getting, and sites like TripAdvisor provide real-time images and feedback. We believe the coworking industry is five or 10 years from a similar logic.
Certain expenses will always be non-negotiable, but they don’t have to bust your budget. For instance, security can be as simple as a reliable key fob system, security cameras and high-speed, secure Wi-Fi. Most of these items must be on every landlord’s checklist anyway; only the shared Wi-Fi is out of the norm.
Solutions and opportunities
Not every worker wants or needs the same amenities. Having multiple membership tiers to fit the needs of different users is how this can be addressed.
Offering communal space options in addition to private and team suites ensures that members can jump between shared and dedicated offices as needed – an attractive solution for many.
Once they’re in, members stay longer if they can go all-in on “nesting” (personalizing) their space. We encourage our members’ individuality and give them free rein to decorate their work areas as they see fit. But we have specific house rules regarding respecting fellow members by keeping the communal workspace areas clean and clutter-free.
As the market becomes more saturated and competitive, we believe independent coworking concepts should consider forming an alliance like One World Alliance in hotels or joining a large group like a coworking association or a franchise concept.
Independent hotel owners derive numerous benefits by converting to one of Hilton’s or Marriott’s brands, and converting to a franchise model offers similar support, proven processes and resources. There’s power in numbers, especially if you have a proven concept but are competing with a large operator who has 100 or more locations to your one.