2017: Setting The Stage For Tomorrow’s Workspace Market

Facebook Twitter Linkedin 2017 marked the year coworking grew up and became the leading driving force behind office sector growth. Community took a backseat in the coworking world as operators realized the importance of services to keep them in business. Property Groups, franchise, and partnerships allowed coworking operators to finance and power their growth and global expansion plans. This article was written by essensys With 2017 coming to a close, let’s look back at the most important stories that defined the coworking and workspace industry. First, however, we must recall that back in 2016 coworking was still finding its place within the office sector. It was referred to in abundance as a “revolution,” a trendy–yet not always profitable business model. 2017 marked a new chapter for coworking. It was the year that proved that coworking wasn’t only the revolution of a trend, but rather that it was a definitive step in the evolution of workspace. In 2017 coworking grew up. It went from a niche term for an open-space, community-focused yet unprofitable workspace model to today’s leading driving force behind office sector growth. Below we define the most important trends we saw in 2017 and the newsmakers that made them happen. CRE Took a Piece of the Pie With a valuation of $12.6 trillion, the commercial real estate industry has undoubtedly been instrumental in growing the value of the flexible workspace market, which attracted some of the largest global property owners in 2017. Real estate giant Blackstone went full-speed ahead into the flexible workspace market, acquiring the UK’s The Office Group for £500 million. Similarly, the Carlyle Group, a global asset manager, made a £150 million investment in the Uncommon workspace brand based on the vision that the demand for new concept working environments will continue to increase. Global Cross-Market Expansion This year also saw the quick and easy overseas expansion of international coworking brands through partnerships. For example, Chinese operator URWork and Serendipity Labs joined forces at the end of this summer for a partnership that would establish the second largest coworking network globally, giving each brand’s members access to the other’s network of locations overseas. London-based global coworking concept Second Home is finding its way to North America via a joint venture between two Chicago real estate companies. Currently Second Home has three locations, with another one on the way in London, and their debut space in East Hollywood in the future. Workbar, a Massachusetts-based coworking operator, recently announced a partnership with a Japanese real estate company, Apamanshop. The collaboration agreement will result in new Workbar locations to the existing network of coworking spaces while also facilitating expansion into new U.S. and international markets for the Japanese brands. Fast-Track To Growth Via Partnerships One of the biggest announcements in 2017 was that of US telecommunications company Verizon and coworking brand Alley NYC inking an agreement to bring coworking spaces, run by Alley, to vacant space within Verizon’s real estate portfolio. This headline was one of the first to highlight asset holders capitalizing on the opportunity to repurpose underutilized space by adding flexible office options. Washington, DC was the first city to see an Alley, powered by Verizon, location. Unique financing became an opportunity path to growth for coworking brands such as 25N and Common Desk, run by Mara Hauser and Nick Clark, respectively. Both brands have leveraged partnerships with property development companies to expand their brand to new locations, with more sites on the horizon. Big Brand Expansion While smaller regional brands began their expansion alongside new flexible workspace market players, such as asset managers and property developers, big-name brands were putting more stakes in the ground across the globe. We Work is a prime example. They now have 200 locations across 19 countries and 58 cities, with more in the pipeline, and a valuation of $20 billion. Meanwhile, Spaces, the sister coworking brand of longtime business center operator Regus, has been flexing its muscles around the globe. New Spaces locations in 2017 include Toronto, Atlanta, Rosslyn, LA, Chicago, San Francisco, Philadelphia in North America and Bath, Uxbridge and London in the UK. U.S. markets such as Atlanta, St. Louis, Charlotte, Nashville, Tampa, and others saw the expansion of Brooklyn-based workspace operator Industrious. They offer a WeWork alternative in the increasingly competitive market with a focus on delivering a premium yet welcoming workspace product for a target member that is slightly older and more mature than the standard WeWork member. The frequent news of space providers as WeWork, Spaces, and Industrious inundating the market so quickly made 2017 an exciting yet tense year for workspace operators. Running a business is a challenge in and of itself, and dealing with increased competition can add some fuel to the fire. However, this year workspace operators learned valuable lessons from this situation. On the one hand, battling the vast competition encouraged the importance of differentiating their brand and service offering and amenities to stay competitive. On the other hand, rapid expansion of coworking has educated the public about flexible workspace, relieving them from doing it themselves and spending money in generating increased interest. As a result, the addressable market has increased, driving up demand.