Why coworking is NOT the future of work
As coworking gets more press, we discover that coworking is really not what it’s cut out to be:
As I look through the newspaper today I see yet another well-funded coworking brand sign another 60,000 sq. ft space in Mumbai. Alarmingly this is the 4th independent coworking brand to infiltrate this 2 sq. km area in the past 6 months. All this while the existing coworking spaces in the area struggle to match occupancy expectations.
Coworking has long been touted as the future of work. Initially originating as compact, economical spaces for innovative small businesses to network, collaborate and grow, coworking spaces, have evolved to service enterprise clients exclusively. While everyone tries to jump on the coworking bandwagon, this industry with shaky foundations is beginning to creak.
The Beginning of the End: The Commoditization of Coworking
As the commercial real estate market slows down we are seeing an influx of both international and domestic coworking space brands enter the real estate market. Consumers faced with a plethora of choices are making decisions based solely on pricing and location. Brand loyalty and innovation is at an all-time low. Enterprises are tuned to look for the safest option at the lowest cost, and suppliers are trying to meet this enterprise demand by supplying copycat products at the lowest possible price. The following are some of the prevalent trends currently in the market:
Occupancy vs Revenue
Occupancy = Success is the probably the biggest fallacy facing the coworking industry currently. Unfortunately, the experts too, are easily fooled by the “occupancy fallacy”. I have had leaders of top IPC’s (International Property Consultants) equate the success of a particular coworking location with their occupancy levels. However, occupancy alone is NOT a measure of coworking success.
Revenue per Seat is a more accurate measure of the health of a coworking location. Coworking operators right now are boosting occupancy level by lowering prices. While this fools most IPC’s, investors and even consumers it is not a true reflection of the success of a coworking space.
Differentiation and Community
I find this especially hilarious and oh so true. Sounding the same as each other is what apparently sets them all apart.
This is even more so common in India where copycat coworking spaces, focused on enterprise, are trying to give people the best deals. This as opposed to differentiating based on experience, design or investing time and effort in building a community. Some Indian coworking spaces are even copying each others website design…
Coworking Space Design
While the standard bearers for coworking space design remain Wework. Few come close to matching their office design. Innovation has come to the standstill with major players waiting on Wework to show them the way. In fact, I implore you to help me differentiate between the ‘cabin’ spaces of the top 5 coworking operators in India. It will make for a very challenging game of ‘spot the difference’
The Way Forward
The only thing the coworking space movement has taught us is that the way we work needs to evolve. Increasingly the commercial real estate space is tending towards full service, flexible and multi-functional spaces. Coworking, is just Step 1, of a much larger movement shaking up commercial real estate
In subsequent blog posts I will be covering the following:
- Everything wrong with WeWorks brand of co-working and how to fix it
- How do you build a coworking brand that lasts
- Building a profitable coworking space
- The future of Commercial Real Estate