This is a guest post from Billy Fink at Hightower. Hightower is the leading end-to-end leasing management platform for the commercial real estate industry. Hightower helps owners and brokers save time, improve visibility, and reduce risk in their portfolio.
Last month, WeWork hit a $15 billion valuation. That’s billion. With a “b”. The valuation reflected a 53% growth in appraisal, and the colossal coworking space is expected to raise even more money in the near future.
Although many people have mixed feelings about WeWork, the company is proving there is a robust appetite for coworking spaces throughout the country; even Fortune 500 companies like GE have started to move some parts of their companies into coworking spaces.
According to the 2016 Coworking Forecast, the industry is expected to see more than 10,000 new coworking spaces open by the end of this year.
While coworking isn’t quite right for all companies, the office alternative is proving to be a sustainable option for many growing companies. We’ve laid out 3 reasons why coworking isn’t going anywhere below.
1. It offers flexibility
One of the biggest benefits of coworking spaces is the flexibility they offer. Companies are able to use coworking spaces as a site of expansion (or contraction), without worrying about complicated commercial leases.
The appeal for these types of spaces has become so strong that, according to CBRE’s recently released shared-office report, the coworking trend is supposed to experience a “five-year compound average annual growth rate of 21%.”
And, companies aren’t the only ones that get flexibility from the setup. Employees benefit from the 24/7 nature of coworking environments, which allows them to set their own hours and still have a reliable place to work. This flexibility is key to the growing community of freelancers and the office expectations of the millennial generation.
Some of the recent growth in shared offices may be due to the major supply shortage for office space around the country right now, but it will be hard — for both employees and companies — to go back to a non-coworking style afterwards.
2. It aids collaboration and fosters new ideas
Coworking spaces also offer a particularly robust form of collaboration — something that few single-tenant offices can match. This form of coworking-fueled collaboration is particularly unique because it combines a mixture of demographics and office layout.
All coworking spaces are designed to have breakout rooms and shared spaces to encourage relationships and communication between companies of different types, all while fostering a sense of community. The physical layout encourages a lot of collaboration between the employees and tenant companies.
But, arguably more importantly, is that the collaboration typically occurs between varied companies and teams that are facing similar challenges. For example, many companies that inhabit coworking spaces tend to be facing growth or transitional changes.
Coworking spaces offer a gathering for dozens of like-minded individuals and companies to share their experiences and offer unique insights. Having similar companies around can offer a great sounding board and ideation chamber. It is a forum for collaboration and new ideas — one that could not be truly replicated in a single-tenant office spaces.
3. It attracts employees
The third major reason that coworking spaces aren’t going anywhere is because millennials really like them — both the design and the lifestyle. And, by 2025, this demographic going to make up 75% of the workforce.
On the design front, millennials want shared spaces. “[They] want a cool, different environment-type of space and culture,” Jason Lewis, president and managing broker of Denver brokerage firm EcoSpace Inc. recently explained. “[Millennials are] overstimulated 24/7. The phone is on 24/7. They’re so connected and over-stimulated that they expect and are used to that in the workforce. The old-school office space just doesn’t work for them.”
Similarly, many millennials are now opting for a more independent work style, foregoing the cradle-to-grave career. There is a flood of workers entering the independent-employment pool, who are either freelancers or contracted help. Contractors are playing a larger role in everyday office life and becoming more important to employers. Coworking spaces are a great office setting for them.
Although the popularity of coworking spaces will likely ebb and flow with market forces and trends in work style preferences, it is likely that — for the above three reasons — they will remain a staple for office solutions.