In large ‘Space as a Service’ has been greatly successful in recent years, but the Covid-19 pandemic has greatly disrupted the business model, leaving people to wonder how likely it is to bounce back to the same level once the dust settles. Globally, the co-working industry was a $26 billion dollar industry in 2019, helping small business owners work collectively, yet separately and giving them access to amenities such as:
- business-class printers
- high-speed internet access
- spacious common areas (which often include desks, chairs, lamps, and lockable file cabinets)
- free refreshments
- an onsite staff
- private phone booths
Companies such as WeWork, host events such as: Wellness sessions, networking events, one-to-one introductions with investors and catered lunches. For freelance and small businesses, flexible work spaces were the perfect platform to start to grow their companies.
Co-working spaces started popping up from early as 2000. Space as a service was a profitable product for real estate businesses and flexible working spaces were set to grow up to 30 percent annually for the next five years across Europe in 2019. The characteristics of the space as a service model enable landlords to charge higher rents because of the short-term commitments and generate a higher return.
The Flexibility of this model allowed businesses to cut their costs quickly if they don’t succeed. But today, its unique business model becomes it Achilles heel, as businesses are struggling through the pandemic and to cut costs begun working from home. Safety also comes into play, as work spaces were temporarily shut down. Leaving many to wonder if the co-working industry is ever likely to recover fully.
Let’s take a closer look.
How Covid-19 have affected the real estate industry
The pandemic has resulted in massive financial loss for the co-working space companies, as people can not work in close proximity to one another. While some companies have waved their fees for SME’s, others are still charging monthly fees, despite pleas from SME’s and freelancers.
COVID-19 has caused many of the world’s largest developers to have to rethink the future, which meant cancelling current projects and coming up with new solutions that fit the “new normal.”
As it will be near impossible to share a communal area without being the correct distance apart, developers are going to have to rethink the entire floor plan to address the changes to run their space as a service business safely.
The future of ‘Space as a Service’ for real estate businesses
Firstly real estate businesses must look to adapt. Looking at new ways to repurpose their properties and how to make them attractive for potential clients as we look to life after Covid-1.
This could entail all sorts of things such as new business models that allow the landlord, tenants and flexible space providers to work in unison and come to an agreement where all parties benefit. A more collaborative approach is on the horizon for the post-pandemic environment that many are still trying to find their way to. Real estate businesses will have to determine how best to provide the flexibility freelancers and small business owners need in this new landscape while keeping them safe.
Despite the effect the pandemic has had on co-working space occupancy rates, some expect the demand for co-working spaces to increase, possibly even higher than before the pandemic. However, the way occupants use space is likely going to change. Buildings need to be redesigned in a way that caters to a contactless existence. Think automatic doors and lifts, contactless interfaces, increased reliance on robots, an upsurge in digital events, and a strengthened digital infrastructure.
What is Co-working space’s biggest competitor
Co-working spaces are increasingly competing with home-offices. About 60 percent of the UK’s adult population is currently working from home because of the Coronavirus lockdown. With research suggesting that working from home could boost productivity (about 65 percent of people said they’re more productive working from home), This could be troublesome for the space as a service businesses. Now that employers increasingly adopt home-working policies, the need for office space in general declines.
A post-COVID-19 world may look a lot different than what people are used to seeing, but it is a necessary part of preparing for an uncertain future. As the world begins to reopen, the co-working space business is adjusting to a new way of life.
What’s on the horizon for co-working businesses?
While the future may seem uncertain, everyone is quickly learning to adapt to the “new normal.” The real estate sector is no different. Real estate businesses will have to pivot to new business models to turn a profit despite the current state of things. People will eventually go back to the office and they will need office space to do that. So for all the co-working space businesses out there, adapt your product, and prepare for your customers to come back soon.