Coworking Takes Hold with Corporate Occupiers: Disrupts Real Estate

The rise of the coworking movement is not just changing the way that startups work, it’s disrupting the entire commercial real estate industry as companies of all sizes are now demanding more flexibility-  instead of traditional long term lease commitments.  Office occupancy costs make up the second largest expense for most companies, so limiting long term commitments to office space provides companies with valuable agility and resilience.

As mobile technologies and the gig economy make the 9-to-5 workday and traditional office culture increasingly obsolete,  coworking enables a powerful new strategy for companies that want to attract and retain top talent by supporting worker mobility and workplace flexibility- while reducing real estate costs.

It’s not hard to see why.   In the same way that companies learned to shrink or grow their workforce on-demand with independent contractors and contingent workers, they are now applying the same approach to real estate, by opting for pay-as-you-go workplace models like coworking.  Workplace-as-a-Service offerings like coworking are causing a permanent disruption in the commercial real estate industry because companies are never going back to paying for staff or office space that they don’t need.

A white paper published last week by Jones Lang LaSalle’s workplace strategy group entitled “The New Coworking Era” puts it this way:  “Coworking is no longer perceived as a new age workplace practice, suitable only for start-ups. More and more companies of different sizes and from different industries are exploring the benefits”.

CBRE: 46% of corporate occupiers are using or looking to use coworking

According to a CBRE survey of 200 corporate real estate decision makers, 46% have now included coworking or are considering adding it to their workplace strategy.  The reports from JLL and CBRE indicate the potential for a massive shift in workspace demand away from traditional leases and toward coworking.

It appears that the commercial real estate industry is listening to its tenants, and is reinventing itself to accommodate the need for flexibility. Commercial real estate owners and investors are including coworking, shared tenant worklounges, event space and pre-built suites to attract tenants with greater flexibility and vibrancy. The trend is not limited to office buildings, and includes even residential towers, and retail real estate. Witness even Staples serving the mobile workforce by including a coworking offering inside its stores.

Commercial real estate investors are also partnering with coworking providers in order to participate in the economics as well as to ensure that tenants benefit from an integrated workplace amenity offering.

The commercial real estate  model is changing rapidly to adjust to a new marketplace reality.  With almost 50% of corporate occupiers looking to shift some long term leases to coworking, it is fair to expect that flexible workplace-as-a-service offerings like coworking will exceed 10% of all office space within the next 5 years.  That would be 1.2 billion (yes billion) square feet in the US alone, or 50 times the current inventory of coworking.  Now that’s disruption.

 

Greater Happiness Leads to Greater Productivity, Study Finds

Modern attention toward a work environment that keeps employees happy is more than just feel-good fluff; a new study shows clearer links than ever before between worker happiness and productivity.

 

Researchers from the Social Market Foundation at the University of Warwick’s Centre for Competitive Advantage in the Global Economy showed that productivity increased by an average of 12 percent — and up to 20 percent — when test subjects were given what the researchers termed, “happiness shocks.” (For instance, they were shown a 10-minute comedy clip or were provided with snacks and drinks.)

 

In addition to the 700-person randomized controlled trial, they also looked at long-term worker productivity data and found that the effect was even more pronounced for unhappy employees, by showing that unplanned, unhappy events in workers’ lives led to decreased productivity for about two years.

 

The findings strengthen the case for employers who are shifting away from the traditional workplace — something that we’ve talked about and has been in the news for years in response to the out-of-the-box workplace practices at companies like Google.

 

Yet we can’t help but wonder: If the happy and unhappy events that affected productivity came from external factors, could there be even greater benefits if employers also sought to make people happier with the way work fits into their personal lives.

 

A shorter commute, for instance — no one starts the workday in a good mood after spending an hour in traffic (long shown to have deleterious effects on people). Perhaps providing a balance between structure and freedom in where and when employees are “at work” could reduce stress and improve overall happiness. The same goes with stifling workspaces. Providing opportunities for workers to learn, not just produce; and creating an environment that is stimulating but not draining, could also have a profound effect on employee happiness and, ultimately, productivity.

 

If people come into the office happier, lighter — feeling as if it was someplace they enjoy being rather than where they are obligated to be, think of how much more productive, more inspired the workplace could be.

 

Here’s What We’re Most Excited About in Coworking this Year

As coworking moves from startup trend to mainstream business model — with everyone from big corporations to freelancers jumping on board — here are three coworking trends that we think are setting a new office standard.

1. Bespoke coworking

With coworking spaces cropping up across major cities and suburbs, it’s no longer difficult to find a place to work. Clients just have to decide which workplace best suits their needs.

Knowing this, spaces are stepping up their game and showing off unique offerings to set themselves apart. For us, it’s letting our members test drive a new sportscar and hosting art exhibits; for others, it’s Thursday night kegs and hackathons. There are spaces with art studios; there are spaces you can ski to; one space even announced it plans to build an indoor lake.

Today, when you’re seeking the ideal workplace, the only limit is your imagination.

2. Coworking spaces become self-sustained networks

At Serendipity Labs, like many coworking spaces, we encourage members to expand their networks; we do this by hosting professional events and designing a workspace that promotes collaboration and communication. As a result, the coworking space has become a hub for learning and growth: large companies hire small startups and help them thrive; individuals attend workshops to advance their professional skills and networks.

The more that membership grows, the more diversity among members. Eventually, a successful, diversely populated coworking space could largely do business solely amongst those who belong there.

3. Sleeping where you work

Recently, there’s been a lot of buzz about co-living spaces, in which people are not only working but also living alongside each other. These spaces — which are taking off in San Francisco and coming soon to Los Angeles — might be an extreme version of the coworking movement.

But then again, maybe they’re not so extreme.  Our Miami location is nestled in two floors of a new high rise residential tower with a rooftop pool deck.

And from our experience, companies need employees to travel for business, but the quality of a person’s work decreases when they work from a hotel room. Most business travelers could benefit from having access to coworking spaces while on the road.

We plan to extend the hotel business center or lobby to an adjacent coworking space. Give business travelers a workplace they can rely on — one with ergonomic workstations, natural light, a secure network connection, and those same opportunities for professional development, while still being a few steps away from where they sleep.

Excited? So are we.

Lease Disclosures to Usher in Flexible Office Era

New FASB Accounting Rule adds $2 trillion of Debt to Corporate Balance Sheets Impacting Real Estate Investments and Workplace Strategy.

The Ruling opens the door for flexible coworking facilities to become a new corporate workplace choice, while addressing corporate imperatives to reduce costs and retain top talent.

Last month, the Financial Accounting Standards Board (FASB) issued a seemingly arcane ruling requiring U.S. businesses to disclose lease obligations for real estate and other major assets directly onto balance sheets by 2019. The new rule, instated after 10 years of review, was designed to ensure transparency and to end off-balance sheet accounting for major liabilities. According to FASB, the rule will add an astonishing $2 trillion of debt to company balance sheets.

Although few could have predicted it, the huge cultural shift to worker mobility will drive the impact of this rule beyond accounting departments and onto investor calls. With an increasingly untethered U.S. workforce that expects to work where and when they choose, companies simply need less traditional office space, even with greater employment. Disclosure of real estate lease obligations will be a catalyst for companies to offer employees flexible workplace options as companies become accountable for a higher performing real estate strategy.

CFOs and CEOs will soon face investor questions about the steps they are taking to ensure that outsized office lease obligations don’t increase borrowing costs or lower enterprise value, especially compared with industry peers. The newly available leasing data will also serve as a proxy for how efficiently a company is managing workplace costs – the second highest corporate cost next to staffing. U.S. workspace expenses represent obligations on over 12 billion square feet of office space. Revisiting these lease commitments is a particularly ripe opportunity for savings when considering a 2014 benchmarking study by HOK Architects that indicates traditional workplaces are utilized only about 48 percent throughout the day due to increasing worker mobility. And according to University of San Diego and Costar, the average office space per worker has fallen by 40 percent from 250 square feet per worker to less than 180 square feet per worker – a number expected to fall below 100 square feet per worker.

The options for responding to worker demands for workplace flexibility and investor demands for more capital-efficient real estate include reinvention of the corporate workplace, contracting with a burgeoning array of on-demand workplace providers that offer workplace-as-a-service, and leasing space in office buildings that offer shared workplace amenities that can extend the capacity of tenant’s leased space.

To that end, companies have already begun recalibrating their workplaces with experiments in unassigned seating and offering new kinds of spaces designed to increase the number of serendipitous employee interactions – all with the hope of reducing costs and spurring innovation.

Yes, reducing long term lease obligations at the corporate workplace is part of the answer. But there is a huge opportunity for immediate and permanent savings by making use of the growing number of third party workplace providers. According to the Global Workspace Association, U.S. companies already spend an estimated $4 billion per year with coworking and serviced office providers, but this represents a mere 2.5 percent of today’s $160 billion annual workplace spend. Month to month service agreements also keep the workplace commitments light, flexible and off the corporate balance sheet.  The most sophisticated coworking brands can even meet corporate workplace standards, including the strict technology security standards required of financial services, many government agencies and health care companies. Coworking spaces also improve the quality of life for the workforce, allowing employees to work in inspiring, productive environments, while cutting down on commutes or occasionally working close to home.

Commercial real estate investment is also being affected by increased scrutiny of traditional leases and the need to serve tenants’ mobile workforce requirements. To compete effectively with new inventory, office-building owners are responding by investing in expansive shared tenant workplace amenities in their existing buildings. These facilities often include work lounges, meeting rooms and collaboration spaces for use by tenants and their guests. Tenants that occupy such buildings can reduce the amount space they lease for their own dedicated conference rooms, and drop-in spaces that support their mobile workers.

The move toward supporting workers with flexible corporate workplace choices is completely aligned with the corporate imperatives to reduce costs and retain top talent. Workers who are given the opportunity to use local coworking facilities to separate worklife from home-life and to make rational choices to avoid hours of unnecessary and unproductive commuting can now add to their quality of life.

The new FASB reporting standard will affect how CFOs report debt and much more. It’s also going to usher in new ways of working for the 21st century, with an unexpected dividend: workers will be empowered with better choices to work where and when they want, unlocking their full human potential. Such a symbiosis among accounting rules, real estate and worker happiness may have been unexpected, but it is now in plain view.

 

John Arenas is Chief Executive Officer of Serendipity Labs, a growing national coworking network. He previously served as CEO of Worktopia, online reservation system for sourcing office and meeting space, and President and GM of the Americas for Regus. In 2009, John was named one of the 25 Most Influential Executives in Business Travel by Business Travel News for his work in developing technology that connects the hospitality industry and workplace services.

The Cost of Working Overtime

A successful business depends on its ability to be efficient. While maximum results in a short time might be the goal of most companies, many are doing the opposite with their overtime culture.

“You are paying extra for the time when people tend to make more mistakes and have fewer good ideas,” says Yoshie Komuro, CEO of the Tokyo consulting firm Work Life Balance Co. Ltd., who recently spoke on the subject a TED conference. “The more time they spend at work, the worse their results become.”

Komuro’s native country, Japan, has the second-largest ratio (in the world!) of people working more than 49 hours a week, according to the International Labor Organization. Komuro suggests this could be a factor in Japan’s years-long lagging productivity.

Whether or not these are actually correlated, Komuro is right about one thing: poor results, over time, can cost you your business.

How it happens

We’ve known for years that our minds need downtime in between focused work. But add the 24/7 stimulation of smartphone technology and, psychiatrist and author Edward M. Hallowell says, we overload the brain’s circuits, which causes smart people to under-perform at work.

This frequently happens within the standard eight-hour workday. Take that information overload and stretch it out over 10 or 15 hours of overtime at the office, and you lose productivity quickly.

Serendipity Labs

We built our business on the understanding that modern workers need a modern workplace — an environment that promotes efficiency.

To us, that’s an ergonomic workstation, lots of sunlight, and common areas where workers can unplug with or without laptops. There are events for networking and socializing, and there are workshops for learning new skills, as we understand that working well isn’t all about output; inspired work also requires input.

We understand that extra hours don’t equate to better work, so we conceived a coworking space where people want to work, where they feel creative and productive when they walk in the door, and where they maximize the time they have in the office.

Eye on Corporate Coworking

Corporate workplace executives now have an eye on coworking as a platform for corporate innovation .   They often start by asking: “What exactly is coworking?” To answer broadly, the term “coworking” refers to any facility that commercially delivers workplace membership as a service.   How to use coworking as a platform for corporate innovation depends on the category of coworking offering.

There are three categories of coworking:

  1. Private Coworking: This means a private members-only workplace facility. Access is only given to a specific group, like company employees in a company, tenants of an office building,  owners in a condominium tower, or registered guests in a hotel.
  1. Public Coworking: This means a workplace offering access to the public. Access is subject only to house rules and payment of a fee, like a day pass or monthly membership.
  1. Permeable Coworking: This is a Private Coworking facility that allows some outsiders in, subject to specific rules. For example, Zappos Headquarters in Las Vegas is experimenting with bringing the public deeper and deeper into their headquarters to work for enhanced vibrancy, energy and opportunities for serendipitous interactions.

Permeable coworking can be pretty scary to most large companies because there’s a perception of risk to security and intellectual property. Part of successfully using coworking for corporate innovation is knowing how and when to use the platform. If used correctly, allowing corporate employees to become coworking members can support various flavors and intensities of innovation; ideation, strategic planning, and special projects or just engagement with a community of innovators through special event programming, workshops and seminars.

Most large companies still perceive coworking spaces as being primarily for startups.  While this is certainly one kind of coworking experience, more corporate-friendly coworking settings like Serendipity Labs are available, where corporate compliance and security are highly valued and corporate employees are welcome.

Executive suites, like Regus, are generally not considered coworking, since they offer mostly individual office rentals and little or no event programming or community building .    This isolation and lack of peer interaction is not “working alone together in a community,” as most coworking communities like to say, but more akin to working alone… alone. This isolation is not a recipe for innovation in anyone’s book. Conversely, in a coworking setting innovation sparks because community, discussion, and brainstorming opportunities are readily available.

To envision a world of corporate coworking success, imagine that key contributors don’t get pulled out of the meetings; imagine the end of windowless hotel meeting rooms; imagine no more skirted hotel banquet tables and sweaty water pitchers. Instead, imagine a technology rich, idea rich, environment.  Coworking is an on demand- innovation platform.

With coworking facilities now opening in most markets, its a ready alternative for supporting corporate innovation.  To get started, it’s as easy as Googling “coworking” and taking a tour or attending an event to find the right ones for your company’s innovation program. Select some internal groups to test this out the next time someone is looking at a training center or hotel meeting space to innovate and, instead, give a coworking space a try.

 

Trends in Hospitality: Revving Up Workplace Services

Photo: http://www.lot-ek.com/SPACIOUS-co-working-hotel | LOT-EK Image

The need to satisfy the demands of smaller business groups has prompted leading hotel brands to capitalize on the coworking trend by creating more purpose-built workplace and meeting spaces.

A recent study from New York University’s Tisch Center for Hospitality, Tourism, and Sports Management states that business travelers are looking for something more than the ability to work from their rooms, and that they are also lukewarm to the idea of working from a small, low-impact business center (which is usually full anyway). Several leading hotel brands are taking this idea one step further, by creating more purpose-built workplace and meeting space offerings. Enter coworking. Offering coworking also solves another challenge for hotels: delivering exceptional small meetings. Large business hotels are great at ballroom-sized events, however, they have a tough time delivering much more than sweaty water pitchers and skirted tables to groups of under 25 attendees.   A move toward satisfying the needs of smaller business groups has prompted hospitality brands to offer co-working style amenities, such as media-enabled studios and work-lounges.  More are sure to follow as business travelers increasingly choose to stay at hotels based on the need to maintain momentum while on the road.

Call it “The Next Generation of Office Space,” or “Office 2.0.”  It is the evolving concept of the contemporary office – where some people arrive, work, and leave on a schedule – while others work remotely, and it is changing the traditional work/life paradigm. Put simply, the office is no longer a stagnant destination, but a mobile information environment that travels with the worker and enables full productivity integrated with all aspects of one’s lifestyle.
“Office 2.0” will have an impact that will extend beyond mere work, and weave itself into the fabric of everyday life.

Which hotel has the best workspace?

Coworking as a fully integrated service within hotels is still on its way to market…Asking about favorite hotel workspaces is like asking whether I prefer using a Blackberry or a Treo.  So far, most hotels are still offering the “flip-phones” of workspace, limited features and awkward designs.    But workplaces delivered as a true hospitality service, designed with the sensitivity and style of an iPhone are certainly coming soon. Coworking amenities are the future of the hospitality industry as customer expectations increase.