Small Business Labs

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. 

How Coworking is Changing Commercial Real Estate

Coworking has reached the size and scale where it's starting to have second order impacts on the broader real estate industry. 

Farthest along is coworking's impact on office design. As anyone who's recently visited a newly designed corporate office knows, they look a lot like coworking spaces. 

And, of course, corporations are increasingly housing employees in coworking spaces. Allwork's recent article The Top 5 Most Valuable Companies that are Using Coworking nicely covers this trend.

But the coworking's impact on commercial office real estate goes much further.

Thanks to a variety of workplace-as-a-service offerings, large corporations are starting to outsource the design and operation of their offices to firms offering to build and operate coworking-like office spaces to house their employees.

For example, the global banking giant UBS recently announced it's turning to WeWork to design and run one of their office space's in New York.

It's one of 30 large corporations using WeWork's Powered by We service, which designs, builds, and operates office space for internal use by corporations. WeWork is also providing similar services for small to mid-sized firms, which they call HQ by WeWork.

The retail real estate industry is also being impacted by coworking. 

According to a recent study by JLL, coworking spaces at retail properties are predicted to grow at an annual rate of 25% through 2023. 

JLL also suggests coworking may help landlords fill empty spaces and revitalize malls hit by the decline of department stores.

An example is mall operator Macerich. They've entered into an agreement with the large coworking chain Industrious to add coworking spaces to some of their U.S. malls. 

 

The mall benefits from leasing space and the foot traffic provided by the coworking space. The coworking space benefits by being in an attractive location with lots of amenities nearby. 

When we first started researching coworking back in 2007, one of our first reactions was that coworking could potentially provide companies and individuals much greater levels of efficiency, flexibility and agility than a traditional office space. 

That potential is being realized and leading to broader changes in the real estate industry. 

Coworking's 2nd order impacts extend beyond real estate. They include increasing the move to flexible and distributed work, helping drive the shift towards greater work/life integration and, of course, enabling the growth of independent work and the gig economy. 

We'll cover these other 2nd order impacts in more detail in the future.

Is Coworking's Surge Leading to Market Saturation?

According to the Reuters article 'Coworking' surge in Manhattan raises asset-liability quandary:

"The amount of office leasing by “coworking” firms in Manhattan is nearing 10 percent of all new leases, a sign of growing demand for short-term contracts by companies seeking workspace ..."

As the article chart below shows, coworking's share of new office leases in Manhattan has grown 4x over the past 5 years.

This surge is leading to questions about whether coworking is reaching a saturation point.

For example, Savills Studley’s Q2 2018 Manhattan Office Report says:

“Like other new innovations the ultimate market share of shared office space is not known, but this growth path seems unsustainable. Even without a recession, coworking will reach a saturation point in the next several years, forcing some level of retrenchment in the footprint of these trailblazers.”

But despite the strong growth of coworking in New York, it’s still lags well behind London in terms of market penetration.

The chart below comparing the two cities comes from Cushman & Wakefield’s report Coworking 2018 – The Flexible Office Evolves. Based on this data, New York has room for more coworking space.

We think coworking in nowhere near the saturation level.

But as we point out in our most recent coworking forecast, we're expecting coworking’s growth in the U.S. and Europe will slow over the next 5 years.

This is simply what happens when an industry get larger.

See our forecast article for details.

"Everything, it seems, is a shared office these days"

The title of this post is a quote from the NY Times article Sorry, Power-Lunchers. This Restaurant Is a Co-Working Space Now.

The article covers Spacious, a startup that transforms unused space - especially restaurants outside of meal times - into shared workspaces. Key quote:

"Everything is now a co-working space, one of those shared offices that are popular among freelancers, small companies and other workers who want a change of scenery. Coffee shops are co-working spaces. Gyms are co-working spaces. Social clubs are co-working spaces. And now restaurants — but only before dinnertime."

This is another example of shared workspaces expanding into a wide range of specialized niches.

We've long covered this trend, with our most favorite recent example being a combo coworking space and spa in Kansas City. 

Allwork's GENERALISATION WILL GET YOU IN TROUBLE”: THE CASE FOR NICHE WORKSPACES also covers this trend and points out a variety of specialist shared workspaces. Key quote:

 "With hundreds of new spaces opening every month, independent operators are urged to “focus on a particular customer segment”

Interestingly, drop by workspaces such as restaurants don't meet our definition of a coworking space. 

This is because they don't offer activities and facilitation that encourage networking and community. 

But they are still very useful places to work that also reduce social isolation and loneliness. And while these spaces may not provide support for networking, it still happens naturally. 

So while they don't meet our definition of coworking, they are valuable additions to the shared workspace industry.

The trends driving the growth of niche and specialized workspaces - technology enabling distributed work, more people working outside of traditional offices, the blending of work and life, etc. - continue to strengthen. 

Which means more spaces will become shared workspaces.

The Continuing Merging of Coworking, Social Clubs and Gyms

Several interesting recent stories illustrate how coworking, social clubs and gyms are merging.

CNBC's Companies are making gyms their headquarters - here's why covers gyms that also have coworking spaces. The segment points out that most gyms are cheaper than coworking spaces and in addition to working, you can also work out and socialize.

The Business Meets Members Club: Is This The Future Of Co-Working?, from Forbes, covers the coworking/social club/event space Spring Place.

They describe themselves as a "thoughtfully curated design destination" with a look and feel "reminiscent of mid-20th century Brazilian Brutalism". 

And yes, we had no idea what Brazilian Brutalism was. 

Regular readers may remember we covered Spring Place's first location in New York city in our 2016 article The Rise of the Combo Social Club, Coworking Space. Here's how we described Spring Place then:

"Spring Place goes beyond just offering stylish work environs in an enviable zipcode .... Spring Place also operates an all-day dining restaurant, bar and lounge, which in turn comes with two private dining rooms for more reserved situations. A glamorous, sunken living room and a cosy, den-like music room are available for performances, receptions, workshops, guest speakers and more."

According to the Forbes article Spring Place is expanding:

"The formula is being rolled out to other major cities. Spring is opening in Beverly Hills in June and in downtown Los Angeles in 2019."

They are also eyeing Paris, Milan and other major cities.

The growth of combo social/work/work out clubs is being driven by a mix of trends including the blending of work and life, increases in remote/distributed work and the continued (and maybe even growing) importance of face to face networking in a digital world.

Related to this, 3 out of the 5 spaces listed in Red Herring's The Best Coworking Spaces in the World target digital nomads.

These location independent professions are the ultimate blenders of work and life and are often found working and socializing in coworking spaces around the world. 

Co-Living Startups Continue to Attract Funding

According to Crunchbase, an "analysis of residential-focused real estate startups uncovered a raft of companies with a shared and temporary housing focus that have raised funding in the past year or so."

The Crunchbase chart below shows startups some of the startups who've recently raised capital.

The article points out that most of these startups are selling community in addition to housing. Key quote:

"...today’s shared housing startups are selling another vision. It’s not just about renting a room; it’s also about being part of a community, making friends, and exploring a new city. One of the slogans for HubHaus is “rent one of our rooms and find your tribe.” ... Starcity pitches itself as an antidote to loneliness. “Social isolation is a growing epidemic—we solve this problem by bringing people together to create meaningful connections.""

In addition to the companies in the article, there are a few more notable co-living firms worth mentioning.

Common, which currently has 14 shared living sites and over 400 members, recently raised $40 million to help fund their expansion.

And, of course, the coworking giant WeWork continues to invest in their WeLive co-living effort. 

The co-living movement continues to gain traction. Euromonitor International even lists it as one of their top consumer trends for 2018. 

We agree with HubHaus that "finding your tribe" is powerful value proposition. If co-living can deliver on this the sector will no doubt be successful.

Cigna's Loneliness Index and Coworking

The large, global health services company Cigna recently released their U.S. Loneliness Index, which found loneliness in the U.S. is at "epidemic levels".

The key findings include:

• Nearly half of Americans report sometimes or always feeling alone (46 percent) or left out (47 percent).
• One in four Americans (27 percent) rarely or never feel as though there are people who really understand them.
• Two in five Americans sometimes or always feel that their relationships are not meaningful (43 percent) and that they are isolated from others (43 percent).
• One in five people report they rarely or never feel close to people (20 percent) or feel like there are people they can talk to (18 percent).

The study stresses, not surprisingly, the importance of regular contact with other people. Key quote:

"People who engage in frequent meaningful in-person interactions have much lower loneliness scores and report better health than those who rarely interact with others face-to-face."

The data supports this, with loneliness scores strongly correlated with how often people have interactions with others.

We've written in the past about how coworking can help reduce loneliness. It does this by both reducing social isolation and creating more opportunities for regular interactions with others.

The social side of coworking is still an understudied area. Also understudied are the health and loneliness impacts of remote work. 

We'll be reporting on some new research in these areas in the coming months.

Will Pilotworks Become the WeWork of Shared Commercial Kitchens?

A lot of people think the coworking movement is only about shared office space, which is wrong

There are thousands of other types of shared workspaces in the U.S., including Makerspaces - communal workshops where entrepreneurial makers share ideas and tools - shared biolabs, auto repair spaces, artist spaces and many others. 

Another example is shared commercial kitchens. 

These are spaces where bakers, caterers and other food entrepreneurs can rent, often by the hour, commercial grade kitchen space. These spaces also offer training, events, mentoring and access to food specific networking activities. 

There are hundreds of shared commercial kitchens in the U.S. and their numbers are growing rapidly. According to a  2016 report by Econsult, "between August 2013 and March 2016, the number of kitchen incubators increased by more than 50%". 

So far the shared commercial kitchen industry, much like the early years of coworking, mostly consists of small, independent operators. 

But just as WeWork, Industrious, Serendipity Labs and other office coworking space chains emerged, the same may be happening with commercial kitchens.

Pilotworks is one of the first nationwide chains of shared commercial kitchens. This food incubator has locations in 7 cities and has raised $13 million in venture funding (led by Campbell Soup's venture fund) to help them expand.

It will be interesting to see if the shared commercial kitchen industry moves the same way as office-based coworking has. The industry is, obviously, quite different than office coworking.

One could easily argue makerspaces are a better analog for commercial kitchens than office coworking is. And so far at least, there hasn't been a successful makerspace chain. 

So the jury's still out on this.

For more on Pilotworks, see Food & Wine's How This Culinary Incubator Is Democratizing Food.

For more on the trends driving the growth of artisan food, see our New Artisans section.

Coworking's Unstoppable Market Growth

Liquidspace's Q4, 2017 U.S. Flexible Office Report covers the continued growth of coworking and other forms of flexible offices.

The report chart below shows that one source - us - is forecasting that over the next five years the number of coworking members will double and the number of spaces will increase by roughly 60%. 

Another source, the large, global real estate services firm JLL, has an even more aggressive forecast. They believe the amount of coworking and flexible office space in the U.S. will triple over the next 5 years. 

They call this "Coworking's unstoppable market growth". 

We've pointed out that our prior coworking forecasts (dating back to 2009) have all ended up being low. So JLL could easily be right. 

JLL also has a very cool video illustrating the growth of flexible workspaces from 2010 to 2017.