Growing coworking industry a constant in a shifting economy

Sam Rosen would be the first to tell you that coworking has a bright future. After all, the designer and entrepreneur runs Deskpass, a Chicago-based coworking subscription service that lets workers float between a curated selection of shared workspaces; it’s his job. He helped found one of Chicago’s first working spaces, the Coop, before creating Deskpass, and compares the growing industry to cafes: For every big-name shop like Starbucks, there’s a funky little neighborhood spot opened by an operator with passion and community spirit.

He’d also be the first to tell you that the concept—paying for access to a shared workspace, a model fueled by the rise in mobile technology and the gig economy—hasn’t quite become mainstream.

“If you go on the street and ask 10 people what coworking is, nine will say, ‘co-what?’” he says. “They just don’t know what that means.”

Coworking has become a trendy topic in corporate and commercial real estate in part because it both recognizes and romanticizes the modern working world. These buzzing hives of activity, shared by tech workers, entrepreneurs, and creatives, represent both the growth of the sharing economy and the antithesis of yesterday’s corporate offices. They’re birthplaces of startups (and in the case of space owned by WeWork, run by them, too). Often set up in converted warehouses or funky downtown lofts, coworking offers a more human, personable option to the tech overload that is the modern office experience.

The industry may appear to get more attention than its size warrants—coworking spots represent only 1 percent of commercial office space across the country, according to Steve King, an analyst with Emergent Research—but it’s poised for exponential growth.

According to a global coworking study conducted by Deskmag, the industry expects to grow by 22 percent next year and expand to 13,800 locations worldwide. Other forecasts suggest similarly steep growth. King believes the upside in the U.S. alone, where 400,0000 to 500,000 users currently rent coworking space, is huge: There are 17 million Americans already doing independent work full time.

“We can work anytime and anywhere, untethered, unlike we’ve ever been able to work in the past,” says Kay Sargent, a senior principal and director at HOK, a global planning, design, and architecture firm that prepared a massive report on coworking earlier this year. “Five years ago, you sort of had to go to the office. Now, people are really free to have that freedom of choice.”

Coworking emerged from the depths of the great recession, a perfect storm that created a pool of talented but underemployed workers, many subsisting on contract or freelance work, and inexpensive commercial real estate. The idea of a shared workspace for temporary workers seemed like the perfect solution, and the social and networking advantages of spending a day with well-networked, like-minded peers offered an excellent ancillary benefit.

But nearly a decade later, with a much different economic outlook, coworking still makes a lot of sense, for reasons that explain how the economy is rapidly changing and becoming more temporal. Sargent sees a number trends converging to elevate the idea of more inspiring, innovative, and flexible workspaces.

Corporations are fighting for top talent, and using office design as a major weapon (witness the headline-grabbing redesigns of offices for Apple, Google, and Facebook.) Designers aren’t just creating an environment to place employees, they’re designing an experience that offers community, control, and empowerment to attract potential hires. These innovative, collaborative spaces are the inverse of the corporate campuses built by midcentury conglomerates; instead of bringing workers to them, corporations are racing to accommodate urban creatives and tech workers, often open (or re-opening) branches in the urban areas where this talent tends to reside.

In Chicago alone, many of the region’s biggest companies—ConAgra, Kraft, Motorola, and McDonald’s—have all announced or opened new downtown offices over the last few years. This focus on downtown is what King refers to as the “paradox of place.” With technology that allows us to work everywhere, there’s still a clustering in big cities.

A big part of that may be the increased importance of networking in a more transient age of employment. Whatever sense of permanence or loyalty workers once felt has been challenged by rising mistrust of corporate America—“This is the generation that witnessed Enron,” says Sargent—the growth of the gig economy, and the expansion of the startup world. Nobody wants to work for Mark Zuckerberg. They want to be Mark Zuckerberg.

These shifts are also impacting the commercial real estate industry, which makes coworking an even more attractive prospect for building owners. Initially, the idea of utilizing floorspace for a shared office was a great way for owners of downtown office space to monetize unused square footage, turning a loss into a gain. Increasingly, the concept of temporary tenants is reshaping the idea of office leases. Startups are opting for coworking spaces, since a down payment doesn’t always make sense for a fledgling enterprise with no long-range business plans.

“You’re seeing a shift in commercial real estate and the way people are working,” says King. “A typical five-to-ten year lease chews up a lot of capital for a startup, especially when you don’t even know what your space needs will be in six months. But even small businesses, as well as large organizations, are seeing the advantage to temporary leases.”

Sargent sees the growth of corporate coworking as a big potential market for the industry (despite media and marketing portrayals, the average coworking member is a thirtysomething working for a big company, she says). Her company is a perfect example. Their New York team rents out a WeWork space, giving them maximum flexibility and minimum risk. These kind of shifts in office space management, coinciding with the growth of a more gig-based workforce, make coworking the potential canary in the coal mine for the temporary economy.

The numbers bear that out. Research from Princeton University suggests that all the net employment growth between 2005 and 2015 can be attributed to the contingent workforce, while the Intuit 2020 Report suggests that 80 percent of global corporations plan to significantly increase their use of contingent labor.

“Corporate America may embrace short-term contract workers and employees and everything may become more temporal,” she says. “The younger generation already thinks about flipping jobs every few years. Studies suggest someone in Generation Z may have 17 jobs within their lifetime.”

The trends suggest that, while coworking is in its infancy, it still has a long runway for growth. King sees the industry forming what he calls a barbell industrial structure: a cluster of big names at the top, such as WeWork, consolidating and dominating the industry, another cluster of small, speciality spaces set up for niche audiences, and a very tiny, middle ground, squeezed on both ends. He predicts it’ll look like the hotel industry, and once more and more corporate clients buy into the idea—he’s waiting for studies that really validate the cost savings for big organizations—it’ll really take off.

“The biggest thing is education and awareness,” echoes Rosen. For a business built to serve the entrepreneurial class, the pioneers have seemingly laid the groundwork. Now it’s just a matter of finding more of the moguls.