What began more than a decade ago as a grassroots movement of freelancers, start-ups and solo entrepreneurs seeking to establish collaborative coworking communities has in recent years catapulted into global phenomenon.
The coworking revolution is transforming real estate, promoting networking, knowledge sharing, mentoring and collaboration which is helping to accelerate innovation and re-energise work and re-imagined places of work. In this article, we consider:
what has influenced the rapid growth in coworking;
the extent those drivers are applicable to the Danish real estate market; and
what evolutions are coming to coworking space next.
Origins: a grassroots movement
A little over a decade ago now, Brad Neuberg had a simple vision: to find a place to work which had the community feel of a ‘cool’ company for solo entrepreneurs like himself. He opened Spiral Muse in San Francisco on 9 August 2005. Those early drivers which propelled Neuberg to convert Sprial Muse, a space which was previously home to a feminist collective in the Mission district in San Francisco, into the world’s first co-working space are still valid today. The space offered five to eight desks two days a week, along with shared lunches, meditation breaks, massages, bike tours, and a strict closing time of 5.45pm.
Like many good ideas, others far away had a similar idea around the same time. More than 5,600 miles away in Berlin, St. Oberholz opened in September 2005 as the first café offering customers “a place to work on their laptops as guests, not as Wi-Fi parasites”. Both locations became popular with freelancers who wanted to a community to support their independent working lives. The initial concept was part of the antecedent thinking which later gave rise to the “sharing economy” that created social media, crowdsourcing, hybrid market models and peer-to-peer exchanges – born out of deep-seated technological, economic, political, and societal changes.
In the middle of the last decade, shared working served a micro need within society, for those on the fringes of the mainstream but a trend detectable across the globe. These original “digital bohemians” re-imagined how work could be: collaborative, location independent and flexible, all made possible by technology – and the rise of broadband which made remote working practical and inexpensive. They consider work what they do, not where they do it. Citizen Space, one of the first officially recognised spaces, was founded in San Francisco in 2006. The following year, the number of co-working spaces globally rose to 75, then to 600 in 2010, before ballooning to 8,700 by 2015 and 11,300 by the end of 2016. The number is forecast to rise to 13,800 by the end of 2017, according to Deskmag, the online co-working space magazine.
Shared workspace promotes networking, knowledge sharing, mentoring and collaboration. The drivers of early modern coworking – such as Spiral Muse in San Francisco, the Hub in London and St. Oberholz in Berlin (see box out) – sought to break down traditional boundaries in the working patterns within and between companies replacing privacy with openness and sharing. In recent years, those early influences have combined with a raft of inter-connected drivers influencing workplace strategies by mainstream corporate real estate occupiers, supporting rising demand for coworking in the years ahead.
Principal drivers influencing the rise and rise of the coworking phenomenon:
Economics. Uncertainty has been the default position for companies worldwide over the last decade with the resulting corporate focus on managing costs and increasing flexibility across labour costs, leases and occupier footprint. Companies are increasingly turning to shared workspace and adopting technology to support staff offshore and flexible staff that do not need to be in the office day-today as an alternative to high-cost CBD offices. More recently, political uncertainty (i.e. Brexit, eurozone crisis, EU threatens, the rise of populism and protectionism) has also added to corporates’ preference for cost-reduction and flexibility.
The changing nature of work and organisations. The rise in self-employment, freelancing and project-based work, as well as start-ups and remote working are all supporting the coworking trend. At the same time, companies are under growing pressure to increase productivity in the current low-growth economic environment, as well as attract and retain talent. Corporate emphasis on collaborating with clients, joint venture partners, and between co-workers is supporting in some cases experimental temporary shared workspaces to drive cross-company innovation and creativity, notes CBRE in its Occupier Survey Report 2017. Coworking aligns these trends offering companies the opportunity to balance cost-reduction and space efficiency with enhanced skill access, cross-sector innovation through knowledge-sharing supporting broader corporate strategy.
The rise of creative and technological industries and the snowball effect. Creative industries and the tech sector were early adopters of coworking space and their numbers are growing. These sectors value the ‘software’ of work – the cultural, social and value system of the organisation – over the ‘hardware’ of work – desks, meeting rooms, IT infrastructure, conference and printing equipment, notes Ramidus Consulting in a report entitled Future Workstyles and Future Workplaces in the City of London. In technology companies, for example, solving knowledge problems through collaborative face-to-face group interaction is first nature. This style of work has caught the zeitgeist, prompting professional services firms, such as real estate advisory firms, business services companies and broader SMEs to start emulating this work style.
Rising demand for flexibility. The demand for greater work flexibility is coming from all angles. Technological and social changes have influenced the youngest working generations – dubbed the Millennials – to prioritise collaborative and creative working environments with the freedom to work whenever and wherever. Young talent wants the office to be in a place that is fun and which blurs the boundaries between work and social life. At the same time, companies are increasingly looking for extra space for short-term projects, experimental cross-company collaboration and temporary space in between conventional leases.
Technological changes. Technology has liberated people from static workplaces supporting flexible working through virtual desktops and video conferencing. Forward-looking companies are turning to new workplace strategies, disruptive technologies and predictive analytics. Harnessing disruptive technologies, such as smart sensors, can provide better metrics across people, places and things providing deeper workplace productivity insights. Employers are also exploring how to outsource, through automation and crowdsourcing, certain operations and to adopt new workplace technologies to enable cost-savings, increase flexibility and reduce fixed costs.
Workforce demographics. The ageing workforce represents a second-order influence on the rise of coworking. Offices today need to provide amenities for four generations of workers – from Millennials, through to Generation ‘X’ and ‘Y’, and the Baby Boomers. All of whom benefit from greater flexible working arrangements, including home-working and hot-desking, which has resulted in higher utilisation of desk space, reducing the overall space required by occupiers. Coworking forms part of a broader set of workplace strategies to improve space efficiency which enables corporates to better manage efficient office footprint through a richer palette of work settings.In particular, Denmark has a positive economic backdrop, supportive government policies towards technology and innovative sectors while local occupiers and landlords are re-imagining office usage.
First, the economic strength of Denmark is improving. Gross domestic product is expected to increase by 1.7% over 2017, up on 1.6% in 2016, which is supporting increased demand for in an already supply-starved office market, particularly in Copenhagen. Competition is increasingly forcing tenants to look beyond the CBD into more affordable locations.
Denmark’s government is keen to attract innovative sectors, such as fintech, offering tax breaks for new entrepreneurs and deductions for investors. Denmark has been named the second most innovative country in the world with 50 fintech start-ups registering in Denmark in the last five years with Copenhagen seeking to become a European fintech hub – competing with Stockholm, Amsterdam and London. Six overseas companies are reportedly considering moving to Denmark at the time of writing.
Tenants’ views on the use of office space has changed significantly in Denmark over the last five years, prompting landlords to react quickly, according to RED Property Advisors, an affiliate of Cushman& Wakefield. “The work space is today a tool to achieve what the companies want,” says occupier services associate partner, Marie Helms. “Many find it positive that you can opt for a work space one day and not the next day. It increases the efficiency and quality.”
We believe the with common facilities in Denmark far outstrips present supply.
Future coworking evolution
Evolution in coworking space is conceivable in the following three directions. First, is through the expansion of the occupier base and in the amenities offered. This is the simplest to conceive: a broader array of sectors could increasingly adopt coworking, such as across the financial services sector, the legal and accountancy industries, investment firms, through to parts of central or local government. Additional amenities, inter alia, already include space for formal and social events, a business centre, coffee shop, library and restaurant as well as associated accommodation.
Further amenity extensions lead to market stratification where at the ‘prime’ end, coworking spaces – and indeed broader corporate real estate – will resemble hotels, rather than traditional workspace. Here, the emphasis is even more on service, customer experience, wellness, hygiene and security (of data and people). For such spaces, the built environment beyond the physical buildings would increasingly form part of the wider experience as rows of desks and banks of computers retreat from the forefront of work activity.
Second is the evolution of new coworking space formats. Currently, there are four standard coworking formats:
internal collaboration spaces, where an individual company within a traditional office setting has exclusive use of a coworking space;
external membership-based coworking spaces, which connect like-minded people in a dynamic, energetic work setting facilitating cross-industry networking, knowledge sharing and problem solving;
ring-fenced external coworking spaces which typically are created for specific collaboration projects between restricted parties, enabling idea exchange in a controlled setting; and
internal coworking spaces opened by companies to external entrepreneurs to give larger organisations access to start-ups and innovative talent (start-ups typically selected via application or interview process)
Future evolutions are format could feasibly include companies complimentary and non-competing companies in an extension of the third format listed above. The popularity between these four formats may well change over time and during different cycles.
The third and final proposed evolution brings us back to technological innovation, such as smart sensors which can deliver predictive analytics on building and facilities management driving efficient energy usage (such as lighting, temperature control, lifts, etc). “Where this is ultimately going is towards automation: Can smart sensor data be generated in sufficient volume and utilised so cleverly that managers can start predicting events with the aim of automating the processes behind them, killing cost and optimising efficiency?” asked CBRE’s Alexander Norwood and James Pearson in a Blog post on disruptive technology in offices and retail.
In coworking specifically, technology can be harnessed in ways parallel to the evolutions in the retail customer experience: managing availability and booking of amenities and services through mobile apps, immersive technology such as interactive displays and virtual assistants.