Interview: Robyn Baxter
How would you define co-working space?
I think the notion of co-working will evolve. It is not a mature industry yet and time will tell how the definition will evolve with it. But currently I think it is that kind of alternative office space where you have some kind of membership to use it.
So membership is key? Is Coworking different from the shared business office concept going back to the 1950s?
I think in its current definition membership is the key. I don’t know that the definition will remain that specific as time goes on as other industries and ways of looking at it evolve. But, there is the notion [this membership] means having a place to go to work when you don’t have another place, a place where you have the necessary amenities including the social aspects of work. Currently, that is what is provided in a co-working environment with a membership base. As the report says, there are even hotels and other places starting to set themselves up to provide these functions. So, I am not sure this definition will remain.
In the traditional shared business space situation, the client company had ownership of specific spaces within that arrangement. There was usually a lease arrangement [and] in shared services I had a specific office that is mine with a locked door. Coworking membership involves no such ownership.
Are coworking locations moving towards providing more diversity in terms of types of spaces they offer as there seems increasingly to be availability of meeting rooms, quiet spaces, closed offices, etc.?
Exactly, but when you go into many coworking working space, the third desk on the left is still not yours: any desk is yours which is what I mean by no ownership. With the addition of more options like meeting rooms that are bookable, you will probably start using such spaces but the intention within co-working spaces is not to overbook…you can’t go in and book a specific desk for a week.
Who are the current most important users of co-working spaces and what is the trend over time? For example, in your study there seems to have been a very rapid increase in the number of corporation employees who are making use of co-working spaces?
Yes, I think that [latter] is the trend. I think that when this all started it was about the small entrepreneur who didn’t want to commit to space but also didn’t want to stay in his home every day. He/she wanted to get out and be part of a community and network while also having all the business amenities required. They could stop by even if only occasionally. Now I think businesses are considering what their real estate costs are and, of course, we travel much more for work and the city I am in may not have a company office. So co-working space has become the alternative to sitting in my hotel room. Co-working spaces are offering alternatives to the corporate traveller.
Corporations are also looking at co-working spaces as a means to manage unexpected growth or short term expansion of staff volume. I know one company that did a lease arrangement with a co-working space where a big project came on board for the short term and they needed a few more desks. The co-working operation was in a neighbouring building so they used it to respond to this short term use.
Will this corporate employee member come to dominate and will this mean some of the creative aspects of co-working will be lost?
I don’t know that it will dominate. Time will tell. I do not think it will dominate but it will be an important part.
What are the most important aspects of a successful co-working space?
Like all real estate, it is about location, location, location. Easy access either through parking or transit is important. Being in a downtown core or business centre around a city is important.
The user experience is central. The reason why people are not working in their hotel rooms or in their homes is because the co-working space better provides desired amenities; it provides the experience they want which is primarily being part of a community, being able to chat with someone around the coffee machine. So I think [locations] are going to carefully craft what the experience is and that is what is leading to other diverse kind of spaces. Whereas it may have just started as a wide-open working space, the addition of spaces where you can take a private phone call or a private meeting is all about sustaining the kind of diverse experiences required.
And then there is this sense of community. It has even become a place for community groups to recruit because people in coworking spaces naturally establish a sense of community. Members may then come together to do such things as joining a charity to run a marathon together. This is not the business part but the benefits part that draws people in.
What do you see as any new, emerging attributes; for example, cloud access, private rooms, etc. key trends?
I think it is options and variety. I don’t think it will be about providing the equivalence of the private office. If people want to work individually they will stay with their other options, their homes or their hotel rooms which are now well fitted out for business use. So, if they want to stay alone, they will stay where they can be alone. Other than being able to go in for a private call or a conference call, I do not see the closed office as becoming part of co-working. But as to having shared reception and offices as the industry matures, it is hard to say.
Will there be a consolidation such as larger firms as opposed to smaller, separate operations perhaps working collaboratively?
I think it will be a combination of both. As costs go up and the population from which they draw becomes larger, spaces will become bigger. Your analogy between Home Hardware and Home Depot is correct. The Home Depot-type spaces are likely to be in the huge centres where the mass of the population and the economics work for a large operation. The Home Hardware-type tends to be for smaller communities or very specific communities that they are trying to draw in. An example is where they are trying to serve the Arts community. I think there is room for both; both will continue to exist.
As populations evolve in terms of neighbourhoods around the cores, that is where some of the diversity will come as well. I don’t know how interested the big operations will be in putting an operation way out in the burbs, but an entrepreneur may know there is a demand. In Calgary, there are people well out of the downtown who do not want to commute every day and their employers are becoming more flexible in terms of mobile work. These type of workers may be looking for another place to go that is close by and out of the core.
This leads into those secondary coworking spaces like those very annoying people who take up spaces in Starbucks when I want to just have a coffee and muffin. Will places like hotels, coffee bistros, etc., as well as add on of co-working spaces by businesses be marginal or key parts of the diversity.
Something I am seeing now is landlords and building owners trying to attract different kinds of businesses into their spaces. This is especially the case if you look at what we call the B-class buildings, buildings with smaller foot prints or in locations that are not attracting the top level tenants but are looking at half floor lease type occupants. The idea of putting a co-working space in the building as an amenity is growing. So, it is a cross between what you called a 1950s office suite and co-working. What are the amenities that the small business owners who are occupying half the floor or less don’t want to put in themselves but they still want to offer as an employee benefit?I think you are going to see more landlords with some type of co-working space that is open both to the business in the building and to the public. I don’t know where that might go, but things like that are going to be competition to more traditional co-working operations.
You even see some banks that are putting in some significant spaces in their buildings to allow the public to come in as part of the development.
There was a recent news story of the first Toronto Condo to offer co-working space. Do you see that as a trend?
It will be the economics that will be the determining factor. Many condos set aside a huge amount of space for social activities such as party rooms. I can imagine a time when these spaces are set out similar to co-working spaces for their tenants. The question will be whether or not the economics work in terms of also providing the backup services like filling the coffee machine, etc.
Will there be a major shift in the economics of establishing co-working spaces? Right now, it seems to have a fairly low cost entry but you have indicated the possibility of significant increases in rents.
[In terms of the last] yes, I do. It may not be just about costs but also about where their clientele is because cities evolve. It’s a time where they will really have to figure out the implications of the rising cost of lease space and do the demographics still need them to be in that location.
The challenge they have is that real estate leases are 5-10 years long but the memberships in coworking spaces are usually 12 months long. So, they are constantly in a selling mode in a big, big way because people come and go. The long term will tell us whether the model can be sustained. If a city does well, and cities have different environments, and the costs go up, can you afford to do that when you don’t know your long term income?
What about such things as LiquidSpace and similar Apps that use an AirB&B approach? Will they be a competitor or will they be part of the co-working process?
I can imagine them as partners in the process. Similar to AirB&B, an App connects a potential client and a physical situation; it is a system. AirB&B doesn’t actually own or operate any properties per se, they just become the conduit to the properties available.This how an App like LiquidSpace can work.
Is potential growth regionalized?
Absolutely. It’s back to the small entrepreneur vs big business taking them over. I think that [growth potential] is a city-by-city thing.
Your study suggests that co-working will stabilize around 2-4 % and saturation is now becoming an issue. What do you see as the maturation trend over the next decade?
If I knew that, I would be much wealthier. I don’t know if I am brave enough to say.I just think that the different profiles of competitors in a relatively new business space, [means] I don’t know if one can predict.
But we are not talking about a really huge part of the market?
That is right. It is not going to replace the corporate office, it is not going to make companies give up large parts of their offices and send their employees to co-working spaces after a certain size. I don’t see corporations using them any more than they are already doing so. But demand is not consistent. In lots of cities there are opportunities for growth but when you look at it overall they are now probably where they need to be.
There is some indication in your study that millennials are not that different in terms of their aspirations to baby boomers. You also talk about the contingent workforce and the rift in the employee/employer contract. But you also report that there is a decrease in self-employment and fewer start-ups. Can you explain to me the difference in terms of the rift but also the decline in self-employment?
I have clients with up to 40% of employees who are on contract, sometimes long term contracts but they are not an employee per see. That is the contingent workforce and will continue to be the model.
Any final takeaway?
Something we are seeing happen is large, large organizations taking the principles of what is working in coworking spaces and trying to recreate them within the company, i.e., that vibe, that atmosphere. Co-working is having an impact on how large corporations think about their own work spaces. Whether they call it their innovation centre or something else, we are starting see corporate spaces that look and act like co-working spaces. What are the attractions, why do people want to go there, why does it attract entrepreneurs? How does collaboration among people happen among people with different interests?