For the past 12 years, I’ve worked for one of the pioneering co-working companies in the country, and I’m proud to say that not only is co-working here to stay, it’s now an essential component of business in the commercial real estate industry. When I initially joined TechSpace, it had a location in California and two in New York. Our success in these markets gave us an ambition to be elsewhere, too. I led expansion efforts to put new spaces in places like Texas, Virginia, New York, and beyond.
The challenging part, though, wasn’t selecting where to put new locations. As with most big projects, we’d judge the results by the execution. Running day-to-day operations for multiple physical locations is not an easy prospect to come by. I had to research and get to know markets, meet with landlords, understand supply and demand for different regional opportunities, plan with local architects, manage construction projects, staff and hire local site teams, work on leasing with the sales team, and more. All of this work went toward helping the company see a return on its investments as quickly as possible.
During the years I was acting as a business generalist and managing these locations, we saw co-working take off and soar. Our clients were small businesses of all types, as well as name-brand VC-backed startups and Fortune 500 companies. We competed with others by constructing energetic and creative spaces where people would be excited to come into work every day by delivering top-notch customer service modeled after the Four Seasons’s white-glove approach for our customers. By building an underlying technology backbone that gave our customers a turbo-charged, first-class user experience we were setting our clients up to succeed.
However, the emergence of so many other players in the co-working segment of this industry complicated matters. Suddenly, we witnessed new spaces popping up in what seemed like every building, with the footprint of each operator’s installation getting bigger and bigger—radically changing the equation for everyone. I remain bullish on co-working but at the scale that co-working companies were building and growing, I began to wonder and worry if expansion in the industry had been too much, too soon. Supply had outstripped demand and from where I sat, and with my experience, the numbers surely didn’t add up.
As a result, the conversation around co-working has shifted in the past year. It’s less about where to drop the next location, and more on how to uncover and bring in people to sign up for those seats. I know better than anyone how labor-intensive it can be to find these people and fill these spaces. You can’t achieve profitability without it. To make matters even more challenging, co-working has to account for the continuous customer churn of companies who succeed. Ideally, in a matter of years, they will outgrow co-working and look to move on. As a result, you need a robust sales pipeline to backfill these seats as they become available again. Coming into new markets and designing beautiful spaces is surely the most thrilling part of the process, but getting to, or even approaching, full occupancy has always been the biggest issue that largely goes unmentioned. The emphasis of late, however, has been on the behind-the-scenes performance of these co-working spaces. Greater transparency about the performance of these operators and their spaces is a step in the right direction.
People moving out of co-working after a year may be perceived as a problem of retention for co-working companies, yet I’ve come to view it as a success of the concept. Thousands of small businesses have had to grapple with early-stage concerns and setbacks before they’re able to scale. Their real estate needs are one of a number of issues they must resolve. Thanks to flexible solutions, they have been able to grow and expand. When they graduate from co-working, flexibility remains something they’d like to preserve going forward, it’s not going away.
Over the past decade, we have all in some way contributed to the paradigm shift in the way work is done, as well as how offices are set up and thought about. This increased flexibility has, in my opinion, become the norm. And if it hasn’t yet impacted your business setup and operations, I can pretty much assure you that it’s coming soon.
That’s why I decided last month to step away from co-working and to take on a new project to help solve the other set of problems for the clients I’ve grown to know and appreciate. SquareFoot announced a new product offering in mid-2019 called FLEX to serve the needs of people leaving co-working spaces and seeking a first office space of their own. When I heard that they were staffing up for a General Manager to lead FLEX, I immediately knew it was the right next spot for me in my career.
The SquareFoot team had a strong sense of where the commercial real estate is heading, and which flexible solutions they should carry to serve the next generation of tenants. They’re working closely with landlords to build out more possibilities beyond what’s already available in the market. But what struck me most about this opportunity is how they’re designing FLEX to appeal to clients who have already told them that flexibility is their key criteria. Rather than speculatively building cap-ex heavy solutions and then sourcing the customers, SquareFoot is doing it the other way around and bringing their customer to the FLEX solution. The demand for shorter leases on traditional office spaces is clearly there and has been for some time. I know of countless companies who arguably overstayed their time in co-working because they simply didn’t know what else they were supposed to do.
As any company matures, it will have to ask some tough questions about where it is, and where it’s heading, every six months or so. The office space it inhabits at that time rests on that list. Are the amenities of co-working still serving you well? Is it still worth paying the premium for those services?
At the end of the day, all executives and entrepreneurs want to retain control over their expenses and have a strong say in the amenities or options that they select. When it comes to office leases, I have seen the length of the lease come up time and again as a main area of concern. On the heels of the success of co-working, and to cater options to the needs of today’s workforce, landlords must be open and able to accommodate tenants’ wishes. This is only the beginning and I am happy to be a part of the future, even if it isn’t by being part of the increasingly crowded co-working landscape.