Small Business Labs

Accor Hotels Major Coworking Push

Accor, which is a large French multi-national hotel and hospitality company, announced a plan to develop 1200 coworking spaces over the next 3 years.

If they do it, they will become the leading coworking brand in Europe by 2022 and one of the largest in the world. 

Accor is planning on rolling out 3 different types of spaces under the brand name Wojo:

Wojo Spots: touchdown spaces located in the lobby's, restaurants and bars of Accor hotel properties and meant to appeal to those who need a place to work while traveling.

Wojo Corners: dedicated coworking spaces located in Accor hotels designed to appeal to locals as well as travelers who need more privacy than provided by a touchdown space.

Wojo Coworking Spaces:  large stand-alone coworking spaces located in commercial buildings that provide both workspaces and hospitality services ((bars, lounges, kitchens).

Coworking is part of Accor's broader "augmented hospitality" strategy designed to engage consumers where they live, work and play. 

We find this strategy quite interesting because it's based on one of our favorite trends, work/life integration. It's also another example of hospitality and coworking merging. 

The short Accor video below explains their coworking push in more detail.

GCUC 2019 - Coworking's Surge Continues

The 2019 U.S. version of the Global Coworking Unconference Conference Series (GCUC) happened last week in Denver. Over 500 attendees showed up to discuss the state of the coworking industry and learn from one another.

It was clear from the discussions and presentations that the state of the coworking industry is excellent.

The industry continues to grow at a rapid pace, niche and independent coworking spaces are thriving, and the big coworking chains continue to expand. 

One thing that caught our eye was the number of attendees from coworking spaces serving new industry segments and vertical markets.

A good example is Palletized, a coworking and cowarehousing space that provides logistics services and warehouse space in addition to office space. This vertical market is quite large and because of ecommerce, growing quite rapidly. And now there's a coworking option for this industry. 

Coworking rapid growth has been driven by 3 waves of customers. The first group were freelancers and independent workers who were coworking's first customer base. Quickly following them were startups and micro businesses. More recently large corporations have embraced coworking.

Going forward we think all three of these groups will continue to drive coworking's growth. But we also see a fourth wave emerging. This wave will be driven by niche and vertical market growth (like Palletized) and geographic expansion. 

Coworking started in the urban cores of large cities. But now it's diffusing across geographies into the suburbs, smaller cities and even into rural areas. 

These areas, BTW, are the home to most Americans. About 98 million Americans live in urban core counties. But 175 million live in suburbs and small metro areas and 46 million live in the nation's rural counties. 

This means coworking is just starting to expand into markets where 2/3rds of Americans live and well over half work. 

Bottom line - the industry has a lot of room to grow.

Allwork's articles GCUC 2019: What Coworking Members Really Want and GCUC 2019: Is the Coworking Market Saturated? - quick answer - no - nicely covers several of the panels and related discussions.

We "borrowed" the picture above from Allwork's GCUC coverage.

Community Lenders Creating Community Spaces - Credit Unions are Opening Coworking Spaces

CreditUnions.com's article 3 Ways to Connect Through Coworking Spaces provides an excellent example of how coworking is spreading across industry verticals and niche markets.

The article highlights 3 credit unions that have opened coworking spaces. Key article quote on these spaces:

Three credit unions are building their own shared space models that reflect each institution’s strategic approach to serving their field of membership while branding themselves as not only community lenders but also community leaders.

CommunityAmerica Credit Union($2.7B, Lenexa, KS) has rented a chunk of the WeWork shared office building in a hip section of downtown Kansas City, MO, to use as work space for its own employees and for community lunch-and-learn and happy hour-style events. The picture below shows a lunch-and-learn session at the space.

Digital Federal Credit Union($8.5B, Marlborough, MA) has created the DCU FinTech Innovation Center, which it describes as a “non-profit, mission-focused fintech accelerator” in downtown Boston. 

Vermont State Employees Credit Union($778.2M, Montpelier, VT) has filled extra space in a new branch in rural Bennington, VT, with local entrepreneurs and other tinkerers and thinkers who now occupy a shared space dubbed the Lightning Jar. 

Credit unions have always been about community.

Most started as small, local savings and loan co-ops. And they continue to be member owned non-profits. 

So it's no surprise the industry is starting to extend their community efforts by embracing coworking.

This is also yet another example of the growing number of differentiated and niche coworking spaces. 

Colliers on Coworking - It's "Established, Expanding and Evolving"

Colliers International, a global real estate services and investment management company, recently released their 2019 U.S. Flexible Workspace Outlook Report.

According to the report's introduction, its purpose is "to help office occupiers and investors alike to better understand:

• The rationale behind using flexible workspace
• Examples of leasing models
• Types of experience models
• The volume and characteristics of flexible workspace in leading U.S. markets
• Key issues facing the sector"

This by itself is quite interesting.

It wasn't that long ago when real estate investors, enterprise occupiers and the services firms, like Colliers, that work with them weren't interested in coworking. 

But coworking and flexible workspaces have reached the size and scale that its impacting and even changing commercial real estate. So now there's lot of interest from these firms.

The growth of flexible workspaces is nicely shown in the report chart below. The amount of coworking and flexible workspace in 19 major U.S. cities grew by almost 50% in the 18 months between 2016 and Q2 2018. 

Despite this growth, coworking comprises only 1.6% of commercial office space. This means it still has a lot of room to grow.

Other key report highlights include:

• Flexible workspace continues to grow at a rapid pace, now accounting for one-third of office leasing in the last 18 months alone (bolding ours; we think it's an important point). 
• Firms are leasing shared space for everything from surge space to touchdown space for traveling executives to incubators for new products and project teams, among others.
• Flexible workspace providers are shifting their focus to target larger corporations and enterprise clients.
• Flexible workspace is impacting traditional leasing models and firms’ occupational portfolios, together with the nature of how office space is designed and utilized. Traditional owners are responding with their own flexible space and lease options.

Overall the report is quite good and well worth reading for anyone interested in coworking/flexible workspaces or the commercial real estate sector.

Coworking Goes to the Dogs (it had to happen)

Allwork's DOG-FOCUSED COWORKING: A Q&A WITH WORK & WOOF FOUNDER JILLIAN DRETZKA talks about Work & Woof, a combo coworking and doggie day care space in Austin, Texas.

Dog friendly coworking is common.

But Work & Woof takes it to a whole new level. Over the half of the facility's space is an interior play yard for the dogs. There's outside play spaces too.

Work & Woof also offers grooming and doggy day care. Key quote from the article on these services:

"We do everything but cutting on-site, so nail trim, baths, blowouts, brushing, we do in that back room. We also do daycare for the day, so you don’t have to cowork and leave your dog, you can just leave your dog."

One-third of Work & Woof's members are dog entrepreneurs. The space even hosts dog entrepreneur meetups. 

Regular readers know we closely follow both the pet humanization trend and the growth of niche and specialized coworking spaces. 

And from our point of view, it was just a matter of time before these trends merged. 

If you're at all surprised that one-third of Work & Woof's members are dog entrepreneurs, see our Pet Trends section for more on the large and growing pet industry.

Why We Aren't Doing a Coworking Forecast This Year

This is the time of year we normally release our annual coworking forecast. And this year would have been our 10^th annual forecast (click here for our 2018 forecast).  But after a great deal of deliberation, we've decided not to do one this year. 

Don’t get us wrong. We’re still going to be researching coworking. We’re just no longer going to do an annual space and membership forecast.

There are several reasons for this:

First and foremost, we're no longer sure how to define coworking in a way that allows us to do a meaningful forecast.  As we pointed out last week, there's a lot confusion around what is and is not "coworking". 

We still like the definition we've used since 2010.  But the industry has continued to expand, evolve and mutate in a wide variety of ways. This is leading to new definitions of coworking, or at least the expansion of the definition to include a wide variety of spaces.

As Laurent Dhollande, Cloud VO CEO and long time flexible workspace expert, explained on the workspace-as-a-service LinkedIn group:

"... the terminology of “coworking" is now strongly identified with flexible and on-demand office spaces of all kind by landlords, brokers, large Enterprises, and the public at large ..."

He's right. And this means we no longer have a clear definition of coworking. And without a clear definition, it's hard to do a forecast. 

Secondly, however you define it, the global coworking industry is big and growing fast. It's always been very challenging tracking and forecasting the coworking industry.

It's been the forecasting equivalent of chasing a runaway train. And that train has gotten very big and is moving rapidly. 

For example, JLL is forecasting that there will be 13 million people working in coworking spaces in India alone in 2020. This is more members than we were projecting the entire world would have in 2020 just a couple of years ago. 

Coworking is also booming in China, Japan and many other places -  including New York, where CBRE data shows (click to enlarge the chart below) the demand for flexible space has dramatically increased in 2018.

The global coworking industry has reached a scale where we're no longer confident in our ability to collect and analyze the massive amount of global city-by-city and country-by-country data required to do an accurate forecast.

And last but not least, coworking is no longer emergent, it has emerged. As you can tell by our name, Emergent Research, our focus and expertise is on identifying, researching and forecasting emerging shifts and trends.

Because coworking is now a large, established global industry, it has attracted the attention of traditional industry analyst firms (CBRE, JLL, Yardi Matrix, etc.) that are better positioned to provide ongoing multinational coworking forecasts. 

As we said at the top of this article, we will continue our research on coworking.

We've always considered coworking a window into the future of work. It's a great laboratory for studying a wide range of emerging social, demographic, economic and technological trends. 

And we’ll keep providing updates on our research here and elsewhere.

Coworking is Disruptive Innovation

The term disruptive innovation was coined by Harvard professor Clayton Christensen and popularized by his classic 1997 book The Innovator’s Dilemma.

According to Christensen:

Disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

The Christensen Institute adds that a disruptive innovation

... is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.

Coworking clearly fits this model.

The early coworking spaces (circa 2008) were targeted at a niche (freelancers and other independent workers) that was considered unattractive and inconsequential to the commercial office space industry, including the executive suites industry sub-sector. 

The spaces were also definitely low end.

The pictures below (click to enlarge) were taken in 2011 at Citizen Space, one of our favorite early coworking spaces. Located in an old building in a low rent SF neighborhood, you entered Citizen Space through a loading dock.

 

And inside it wasn't anything like today's coworking spaces.

 

But as Christensen points out in his 2015 HBR article What is Disruptive Innovation:

... as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. 

And while early coworking spaces weren't elegant, they delivered the functionality their overlooked customers were looking for at a price well below other alternatives.

Fast forward to today and it's clear coworking has not only become a successful industry, it's disrupting and changing the entire commercial office real estate industry.

Repeating a quote from our post yesterday:

Everything that we know about landlords and how workplaces are designed, built, managed and staffed is being disrupted ...

When we first started tracking coworking back in 2007 we thought it had the potential to disrupt the commercial office space industry. It's now clear it's doing so.

Coworking Doesn't Need a New Name, But the Office Space Industry Does

There's a mini controversy going on around whether or not coworking needs a new name. 

The recent Allwork article Why Coworking Needs a New Definition covers the new name side.

Key quote from Joyce Bromberg, chief strategy officer at Convene:

Everything that we know about landlords and how workplaces are designed, built, managed and staffed is being disrupted, necessitating a new name for what Bromberg predicts will become the way people work and how real estate will be consumed.

“Continuing to call it coworking is doing a disservice for what it has become.”

Liz Elam, long time coworking space owner and founder of GCUC, responded to this with her article Coworking Does Not Need a New Definition.

She stresses that the traditional principles, values and definition of coworking are still important and relevant and that a new name is not needed.  

Allwork responded to Liz's article with Coworking Might Not Need a New Definition, but it Needs to Broaden the One it Has. It suggests the term "flexible workspace" might be the way to go. Key quote:

The industry has come a long way since it first took off in the early 2000s. As coworking spaces have evolved from open space to hybrid space, more people and organizations are increasingly using the term flexible workspace. 

We agree that the term "coworking" is too limiting for what's going in the commercial office space industry. Firms like Industrious, WeWork, Serendipity Labs and many others no longer just provide workspaces where people work alone together. 

They design and build out space to the specific needs of their enterprise clients. They provide ongoing facilities management, community features and a variety of other services, including IT and data on office usage patterns. They also build out and manage space that is completely occupied by the client's employees.

And very importantly, they provide more flexible lease terms than commercial real estate has traditionally provided.

Although these spaces are based on and share many attributes with coworking, they aren't coworking spaces. Instead, they're outsourced workspaces provided by an office services company. 

This is part of a much broader trend - the servitization of products - that's impacting most industries. In the case of office space, this means a shift towards customized, turn-key, scalable, consumption-based commercial office space delivered as a service. 

For this broader shift, we like the term "workspace-as-a-service". There are several reasons we like this name. 

As-a-service is already a common way to describe the servitization of products. It also fits with what's going on in the commercial office space industry.  And, of course, it's already being used by many in the industry - there's even a LinkedIn group with that name. 

To us, coworking is a sub-sector of the workspace-as-a-service industry. It's the name for workspace-as-a-service spaces that embrace the principles of the coworking movement - community, openness, collaboration, accessibility and sustainability.  

And BTW, coworking spaces that embrace these principles are not going away. Just the opposite, niche and community oriented coworking spaces are growing in number and thriving. We're forecasting this to continue. 

Back in 2010 we said one of the most interesting things about the coworking industry was how rapidly it was expanding, evolving and mutating. It's still true today.

But we've also said we think the industry should begin to use a more reflective and descriptive term. 

But from our point of view, it's not the coworking industry that needs a new name. It's the commercial office space industry. 

Why Independent Work and Coworking Increase Mental and Physical Well-Being

McKinsey's The overlooked essentials of employee well-being focuses on how companies can improve the well-being of their employees.

But it also explains why the self-employed - and especially those that work in coworking spaces - report higher levels of wellness and work satisfaction than traditional employees do.

It covers two critical factors - job control and social support - that foster physical and mental well-being. Key quote on job control:

"Studies going back decades have shown that job control—the amount of discretion employees have to determine what they do and how they do it—has a major impact on their physical health. Recent research also indicates that limited job control has ill effects that extend beyond the physical, imposing a burden on employees’ mental health, too."

As we've often pointed out, job control is one of the key reasons the independent workers (the self-employed, freelancers, independent contractors, etc.) become and like being independent.

It's also one of the reasons independent workers report being happier and healthier because they're independent. 

But a drawback of independent work is loneliness. As the McKinsey article points out, a lack of social support is not good. Key quote:

Research going back to the 1970s consistently demonstrates a connection between social support and health ... The evidence shows that social support—family and friends you can count on, as well as close relationships—can have a direct effect on health and buffers the effects of various psychosocial stresses, including workplace stress, that can compromise health.

This is where coworking comes in.

As we said in our article Coworking Is Not About Workspace — It’s About Feeling Less Lonely, coworking spaces provide social support. 

The McKinsey article nicely sums this topic up by saying:

Giving people more control over their work life and providing them with social support fosters higher levels of physical and mental health.

This is exactly what the combination of independent work and coworking provide.

Having said all that, we are well aware that not all independent workers have control over their work. We also are fully aware of the downsides and negatives that come with being self-employed. 

But for those who do have control, the combination of independent work and coworking can lead to a healthier life.

189 Coworking Spaces Opening in August

According to Coworking Resources, a site that provides information for coworking space owners, 189 coworking spaces are opening around the world this month.

As their chart below shows, over half of these openings are new, independent coworking spaces. The rest are expansions by independent operators (27%) or the large coworking chains (16%).

       
This reflects the continued growth of indie coworking spaces, who are thriving despite the rise of large coworking chains like WeWork, Industrious and others. 

It also highlights the strong growth of the coworking industry.

New coworking spaces, on average, are 4-5 times larger than they were 7-8 years ago. This means the coworking industry is adding in August alone about 3-4 times the amount of space the entire industry had in 2010.  

Coworking Resources tracks this by following announcements in the press as well as getting coworking space opening announcements from the spaces.

This approach results in a conservative estimate of space openings. It's really hard to capture all the announcements across 195 countries. We know because we used to do this. 

But while unlikely to capture everything, this methodology provides a directionally correct and useful estimate of space openings.  Kudos to Coworking Resources for taking on this challenging task.