Small Business Labs

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. 

Fab Labs, Maker Spaces and the 3rd Digital Revolution

A new book, Designing Reality, argues we're entering the 3rd digital revolution, which the authors say is based on new fabrication techniques and technologies. 

In case you were wondering, the book says the first two digital revolutions were computing and communications.

The 3rd revolution is being driven by a combination of computer aided design tools linked to a variety of fabrication technologies including laser cutters, NC milling machines and, of course, 3D printers.

The authors are three brothers including Neil Gershenfeld, who runs the Center for Bits and Atoms at MIT.

The center studies "how to turn data into things, and things into data." 

Gershenfeld is also a founder of the Fab Foundation, which supports a global network of over 1000 Fab Labs.

These are makerspaces focused on educating members on digital fabrication. They are located primarily in schools, libraries,museums and other public spaces.

The book lays out a future where in the next decade fabrication stores will be located in most communities. Think FedEx Office/Kinko's, but for making physical goods.

Twenty years or so into the future the book suggests homes with a digital fabricator will be common. And in 30 years or so most homes will have multiple digital fabricators, fulfilling Star Trek's vision of the replicator. 

While this vision may or may not come to pass, what is happening is the number of global  fab labs and makerspaces is rapidly growing. 

We've long studied these coworking spaces for making things and our 2009 study on the maker movement is one of our favorite research projects. 

So while a Star Trek like replicator is probably decades away, fab labs and makerspaces are changing how things are made today. They're also creating new, small business manufacturing opportunities.

Coworking, Differentiation and Segmentation

Kansas City's Laya Center (pictured below) is the the first coworking spa in the U.S. 

In addition to having the only natural cryotherapy chamber in the Midwest, the Laya Center also offers chromotherapy as well as yoga and other traditional spa treatments and services.

And, of course, it offers a workspace.

As the coworking industry continues to expand, so do efforts on the part of coworking spaces to differentiate themselves and target niche market segments with specialized services.

The Laya Center is an interesting example of this trend, which is covered in several recent news articles.

The Washington Post’s Female-focused co-working spaces offer career and child-care help still lacking in many traditional workplaces covers the rise of coworking spaces catering to women and/or offering childcare. Key quote:

"The booming co-working industry, launched to accommodate the increasing number of entrepreneurs and corporate employees who work remotely, is now tailoring itself for women by offering workspaces with female-focused networking and career seminars … Increasingly, these workspaces, as well as those that cater to all working parents, are also offering child care, a service still lacking in many of America’s workplaces."

The article goes on to point out that “About half a dozen co-working spaces are slated to open or expand this year in the District and Northern Virginia, offering services specific to women or child care.”

The USA Today’s As co-working grows up, niche spaces catering to small businesses take center stage also covers the growth of differentiated spaces. Key quote:

As well-known co-working companies like WeWork offer space to businesses in many industries, a growing number of niche or specialty players such as The Wing and Hera Hub, which cater to women, are growing in popularity. There are spaces centered on specific industries such Biolabs, which offers co-working to biotechnology firms, or Boston's Workbar, which has a regional focus. These specialty hubs are a sign of the co-working industry maturing a decade after the recession sparked demand for more flexible workspace for freelancers and start-ups.

Treehugger's Take a look at these awesome coworking places around covers a mix of unusual spaces, including coworking spaces that look like adult playgrounds and others that are almost jungle like due to an abundance of plants. 

The coworking industry has long had a variety niche oriented spaces. But the growing number of differentiated spaces targeting specialized market segments is another sign of the mainstreaming of coworking.

Study Finds U.S. Has 27 Million Square Feet of Coworking Space

Yardi Matrix, a provider of real estate industry data and research, has released an interesting coworking study. 

They've also written an article - Shared Space: Coworking's Rising Star - summarizing their results. 

Key quote from their report:

A study by Yardi Matrix of coworking leases in 20 major markets found 1,166 coworking sites with 26.9 million square feet of space. That represents 1.2% of office space in those markets. Coworking has proliferated more in cities: Leases encompass 1.4% of urban office and 0.9% of suburban office space.

At 7.7 million square feet, Manhattan has by far the most coworking space, followed by Los Angeles with 3.7 million square feet. Miami has the most coworking space as a percentage of stock, at 2.7%, with Manhattan coming in second at 1.7%.

They point out they believe this is the first study to "quantify the amount of square footage of coworking space in relation to total office space within markets." 

They did this by analyzing leases across the 20 major cities they studied. This is a very clever approach. 

Our favorite finding is illustrated in their chart below. It shows a strong relationship between coworking and office vacancy rates by city.

This relationship makes sense. Lower vacancy rates means it's harder to find office space. It also Likely indicates traditional office space is more expensive. Both of these make coworking spaces more appealing.

We think there are other, related causal factors at play here. In particular, cities with higher concentrations of tech and tech related companies seem to correlate with low office vacancy rates and more coworking spaces. So a city's industry structure may also help explain this relationship.

Regular readers may have noticed Yardi found substantially fewer U.S. coworking spaces (1,166) than we found as part of our recent U.S. coworking forecast (4,043).

The reasons for the disparity have to do with definitions and methods. Yardi only looked at 20 major markets while we looked at the entire U.S.

Yardi also only included coworking spaces in building with 50,000 or more square feet. They did this because there are lots of small buildings and to analyze all the leases would have been an enormous task. But this approach meant they missed a number of small coworking spaces.

Yardi also only included office coworking spaces, while our numbers and forecasts include other types of shared workspaces (maker spaces, shared kitchens, etc.). 

When we adjust for these differences, we think Yardi's findings on number of U.S. coworking spaces is roughly consistent with ours. 

At a broader level, it's good to see firms like Yardi Matrix providing data and studies on coworking. Not only does it add to our collective knowledge about coworking, it's a clear signal coworking is moving to mainstream.

One last point.

A decade ago there was only about 40,000 square feet of coworking space in the U.S. This means there is about 675 times more U.S. coworking space today than a decade ago. 

Social Isolation - Not Just Loneliness - a Health Risk Reduced by Coworking

Social isolation and loneliness are related, but not the same thing. 

Social isolation refers to having relatively few relationships and/or infrequent contact with others.  Loneliness is the perception of feeling alone, or feeling disconnected from others. 

Someone can be isolated and not feel lonely. They may even like and seek out solitude and being alone. Likewise, someone can feel lonely and yet be surrounded by others.

But according to researchers at BYU's Social Connections and Health Institute, both loneliness and social isolation lead to increased risk of health problems and early mortality. 

And if you're both isolated and lonely, your health risks are even greater. 

Which brings us to coworking. 

Our recent HBR article Coworking Is Not About Workspace — It’s About Feeling Less Lonely focused on the loneliness issues coworking helps with.

But we didn't discuss how coworking helps with social isolation.

This is because we felt it's kinda obvious - if you're working in a crowded and active coworking space, it's clear you aren't isolated.

Also, while we knew social isolation is problematic, we didn't know it can be as big a problem - at least health-wise - as loneliness. 

But after listening to OnPoint Radio's Ex-Surgeon General On A Way Out Of Loneliness: Put Down Your Phone and reviewing BYU's research, we realized the reduction of social isolation is another important benefit of coworking.

We also reviewed our coworking interviews and found many references to coworking reducing the social isolation of independent and remote workers.

The most common comment of this type is "it's so nice being around people". 

This, by the way, is also what we hear from people who work in coffee shops. They like being around people, even if they aren't interacting with them. 

But coworking spaces reduce both social isolation and loneliness, which is a key reason the coworking industry continues to grow rapidly.

It's also one reason coliving is seeing an uptick in interest.

Humans are social creatures and as such, will always seek to be around and interact with other humans.

Coliving Attracting VCs

While coworking has taken off, coliving has struggled to gain steam.

Part of this is venture capital and investment funds have been hard to come by for those trying to build shared living space businesses.

This appears to be changing. 

The coliving company Common recently announced raising $40 million in a round led by Norwest Venture Partners. 

Common currently has 14 shared living sites and over 400 members. They plan to use the new money to fund expansion.

Other coliving companies raising money over the last year include Starcity, Roomi and Bedly. 

And, of course, coworking giant WeWork continues to invest in WeLive, although they appear to be expanding this business at a slower rate than they originally planned.

The picture below (click to enlarge) is from their website and shows some of the features and benefits of coliving.

The trends driving the coliving are similar to those driving coworking. Rental space is expensive and hard to find in many cities, people are seeking community and want a greater degree of housing flexibility.

Euromonitor points to these trends as some the reasons they list coliving on their Top 10 Global Consumer Trends for 2018 list. 

Despite coliving gaining some momentum, it's not clear to us it will become a major industry like coworking has. Housing is a much different and more complex market.

But we will continue tracking coliving to see.