The Writing on the (Real Estate) Wall is.....Coworking!
Just five years ago in 2007, the commercial office landscape was a different vista. At that time, if I had proposed to a tenant that they share office space with another unrelated business, I would have been considered crazy. It would have been weird, like having a roommate, or worse, like sharing an apartment with a total stranger. This is New York City.. real businesses don’t need to resort to that...
Later that year, the real estate world quietly changed. In 2007, New Work City, NYC’s first coworking venue opened its doors in the East Village. Yes, shared environments had always existed, but the model was more like a hotel, with walls and privacy and reception areas. Providers like HQ and Regus had owned this market, to the extent that the landlords started to take notice and not renew their leases. Landlords created their own brands of executive suites, like PowerSPACE (Vornado) and eMerge (S.L. Green) to operate in their former tenants’ spaces. But similar to a hotel, it’s often difficult for an executive suite provider to differentiate or capture a “vibe”.
Enter coworking.. more like a commune or a nudist camp for professionals. All of the walls (physical) and barriers (psychological) to collaboration have been removed. Everyone works in an open environment. Everyone is exposed..
Coworking spaces represent the socialization of office space. Today, small businesses and sole proprietors can have real locations with virtual teams and resources. As a coworking proselytizer, I have been “eating my own dogfood” as a current member of Grind, a coworking space at 29th & Park Avenue South. The experience has been educational and eye-opening. Coworking offers the benefits of an office (support services, social interaction, collaboration) without the negatives (distractions, interruptions, internal meetings, politics). In a coworking facility you can be independent or collaborative, anonymous or interactive, all at the same time. By plugging in my earbuds and focusing on my to-do list, I can accomplish a half-day’s work in a highly efficient ninety minute burst while at Grind!
But the greater impact of coworking has been quietly rocking the traditional world of commercial office space. Witness this... in 2007 shared environments were few in number and were advertised in traditional media, like the New York Times or New York Law Journal. Today, shared environments are listed in property databases with brokerage fees available to both tenant and listing agents. This has created a new property class and revenue stream for commercial real estate.
However, the other side of the coin for commercial real estate is coworking’s impact on occupancy. Traditional office tenants have been trending towards lower square footages and higher employee densities as they try to imitate the trends started by the technology sector. Traditional office layouts have gone the way of open and collaborative environments with shared amenities and communal areas. The physical representation of a personnel hierarchy is becoming a workplace Stegosaurus.
Finally, I have notice a couple of recent trends that have firmly confirmed my beliefs that coworking is not a fad but a quantum shift in workplace. One, a couple of traditional, financial services firms have placed “stealth” HR teams into coworking facilities to try to guage the emotional temperature of the next generation of employee. Two, landlords, seeing the profit opportunities, are trying to get in the game by wooing the coworking operators as their potential tenants or partners.
As the saying goes, imitation is the sincerest form of flattery. Long live coworking!