Coworking- office space where an individual or small group can rent open or semi-private workspace- is a business trend on the sharp rise. As of 2017, approximately 13,800 coworking facilities exist globally, growing at a 22% rate each year, according to the 2017 Global Coworking Survey. Over 1,180,000 people around the world work out of these types of spaces. With 12,500 square feet of coworking space in operation in this city, we thought it was time to take a deeper dive into this trend and better understand the true coworking value.
On the surface level, coworking spaces are exactly that- places to work. They typically include some sort of open work area, where people can rent individual desks on a monthly, or even daily, basis. Some coworking facilities offer semi-private office space, like the small group “campsites” at COCO Coworking. Most coworking facilities also contain sound-proof areas to take phone calls, meeting room space, snacks, beer, lots of coffee, and a mailing address outside of your home. Some even have in-house bars, lockers, showers, daycare, and discount partnerships with local business (such as WeWork and Lyft in Minneapolis).
Coworking spaces are not just for the uber-hipster, either. And they’re not just for the solo entrepreneur. Small teams, freelancers, remote workers, startups, and teams from Fortune 500 companies can and do operate from coworking facilities.
The extreme flexibility of coworking spaces is perhaps their biggest value add in today’s dynamic business climate. Coworking rental agreements are typically no longer than one month and are renewed on a monthly basis. This allows businesses to avoid long-term leases and offers the ability to scale up or down both the real estate and team in a financially responsible manner.
Coworking facilities come in a variety of flavors. There are massive, one-size-fits-all, chain entities like WeWork and Industrious, both of which have locations in Minneapolis. WeWork is the giant, for-profit entity in coworking; the business has a $20B valuation (Crunchbase), with 305 office locations in 62 different cities. Industrious, also for-profit, has 25 locations in the US and just raised $80M (Axios).
While all general purpose coworking facilities can’t all be unicorns, they can be francized, even on a smaller scale. The Beauty Shoppe is a prime example. This private-public partnership began as a single entity, in a beauty shop in Pittsburgh’s East Liberty neighborhood. Now, The Beauty Shoppe has four additional locations around Pittsburgh and one facility in Cleveland.
COCO Coworking, another for-profit business, is a great example in our region. COCO now has four Twin Cities locations and has set up shop in Chicago. COCO recently rebranded to Fueled Collective, where their facilities will blend into a hybrid coworking space and social club, linking this community to other Fueled Collective spaces in New York and Cincinnati.
Coworking spaces can also be targeted to specific demographics, when the community is large enough to support it. Several examples exist in the Los Angeles region including One Roof Women, a space specifically for females; The Hatchery Press, a work area just for writers; and Kleverdog Coworking, a facility for the dog lover.
While there certainly are a plethora of coworking facilities on the global scale, only 41% of coworking spaces are actually profitable. The bottom line: they just take a lot of money to run and receive little money in return. On a non-financial level, coworking spaces can also fail if they do not create an identity, offer no or poor business programming to their members, are not involved in the local community, and fail to develop an inspiring physical space.
“The success of a coworking space depends on the community that you’re in,” explained Jamie Sundsbak, Community Manager of Collider Coworking in Rochester.
Some particular standout successes occur when coworking spaces popup in repurposed, old buildings and activate that space. This helps to drive foot traffic, interest, and activity to perhaps otherwise unutilized areas of a city. This was the case with Collider Coworking, which took space in the over 100-year-old Conley-Maass-Downs Building in 2016.
Success also occurs when coworking facilities bring distinct educational value to their tenants, such as The Corner, a Beauty Shoppe location in New Kensington, Pennsylvania. This facility offers a ten-week training program in conjunction with Penn State University to support product commercialization.
The most effective coworking spaces, by far, are those that add value to both the surrounding community and to their tenants. They are useful tools to cluster creative minds together to generate synergy, spur innovation, and fuel collaborations to solve real problems. They also provide cost-effective office space to get emerging companies off the ground.
In a city the size of Rochester, coworking spaces may be more effective as non-profit entities, where they “turn more into an economic development play than a co-working space alone,” explained Sundsbak.
Red Wing Ignite, a non-profit that provides coworking space in Red Wing, Minnesota practiced this concept since 2013. Red Wing Ignite subsidizes rental costs to tenants and keeps the lights running through a variety of private-public partnerships including support from Xcel Energy, Goodhue County, Red Wing Shoes, the City of Red Wing, and the Southern Minnesota Initiative Foundation.
In Rochester, we have four different co-working spaces, financed in a variety of ways, including: The Vault, Collider Coworking, the Mayo Clinic Business Accelerator, and Rochester Area Foundation. We are on par with the global coworking trend; most of these facilities in Rochester are at 75-100% capacity.