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Page 16 — Office Properties Quarterly — September 2020 www.crej.com Coworking I f you asked people involved in the coworking space during the first half of 2019 what their long-term outlook was for the industry, it would have been overwhelmingly positive. WeWork, the nation’s largest coworking operator, was on a tear leasing up several spaces in the greater Denver area. In fact, even still it is Denver’s largest landlord with nine Denver locations totaling approximately 570,000 square feet, plus an addi- tional 30,000 sf office space in Boul- der. Other coworking companies, such as Regus and Novel Coworking, also have been expanding their foot- prints. Between the three biggest coworking companies alone, they occupy more than 1.3 million sf of office space in Denver. Fast forward to today, and the office climate is dramatically dif- ferent. Clearly the onset of the pan- demic has altered demand for office space, but even prior to the dis- ruption caused by the novel virus, WeWork was already in trouble. 2019 was a bad year for the cowork- ing giant as it featured a failed ini- tial public offering bid in mid-Sep- tember, a multibillion-dollar bailout from SoftBank in October, negative press surrounding leadership fail- ures and significant layoffs. The public health crisis of 2020 could not have come at a worse time for the once-promising unicorn. As of this writing, it has backed out of a deal to occupy four floors in an office in Uptown, it is no longer pursuing space at McGregor Square, and it has removed its consideration for leasing space at Junction23. And it’s not just WeWork that is struggling; The Riveter and Charley Co., two women-oriented coworking spaces in River North that opened in July 2019, announced they will perma- nently shut down due to the pan- demic. Government-mandated shut- downs for the state of Colorado were implemented in March and lasted for two months. It was not until early May that Gov. Jared Polis stated that offices could gradually reopen at 50% capacity. Although restric- tions have eased, countless compa- nies have chosen to drastically delay going back to work. As employees have proven that their overall effi- ciency and work capabilities are not negatively impacted by working from home, some office users have even announced permanent work- from-home strategies. For cowork- ing specifically, the challenges are intensified since open floor plans and coworking office spaces are, by definition, not conducive to social distancing. And while all operators are employing increased cleaning schedules and have de-densified spaces, the concern of working in proximity to others wins the day. So, is coworking dead? While the road to recovery is steep, there are a few reasons why coworking could survive, or even thrive, in the years to come under our “new normal.” First, the decline in office demand with more workers staying home could trigger downsizing of office space for some Denver-based com- panies. As more businesses continue to work from home effectively, their need for large amounts of office space decreases. Will coworking capitalize on this opportunity with the ability to lease smaller amounts of space to downsizing users? Sec- ond, coworking space can offer flex- ible lease terms that may appeal to tenants with upcoming expirations who may choose to seek a shorter term rather than being locked in for a long period of time given the uncertainty caused by the pandemic. In this time of uncertainty, flex- ible lease terms are a benefit many companies are seeking. Rather than signing a five- to 10-year lease, busi- nesses can lease space at a cowork- ing facility on a monthly basis. The coworking model allows enterprises to add or subtract from the number of desks they occupy, which simpli- fies hiring and scaling. As employees demand a more flexible work schedule and environ- ment, coworking continues to offer an adequate solution. As employers realize that large amounts of office space are no longer needed to sup- port business operations, coworking could fill that need. However, for coworking to survive, the business model may need to adjust to attract the more established businesses that rely on the flexibility that is vital when economic uncertainty affects hiring and growth plans. For exam- ple, imagine the established firm that needs to expand its total office footprint to allow for more spacing within its office by supplementing with multiple coworking spaces in strategic locations near employees’ homes. A hybrid approach of tradi- tional office space, coworking and home may fit well into the future of office demand. So while the last several months may suggest that coworking is a dying industry, don’t count it out just yet. There could be a lot more fight in it. s Coworking: Is it here to stay or time to vacate? Will Fehr Appraisal associate, National Valuation Consultants Inc. F or decades, the office has represented the living, beat- ing heart of an organiza- tion. In the best of cases, the office buzzed with a collec- tive energy and collaborative spirit that allowed companies and their employees to flourish. Then the global pandemic hit, rel- egating the “traditional” office to a costly operating expense as business- es across the country searched for ways to remain profitable during this unprecedented time. In short, that heartbeat, once fueled by impromptu brainstorm sessions, hallway con- nections and team celebrations, grew faint in favor of safer remote work options. Pay close attention to the trajectory of the conversation surrounding the future of office real estate and you’ll see myriad guides to rethinking tra- ditional workplace design to accom- modate greater social distancing. All of those guidelines, however useful in addressing the present health and safety concerns brought on by a glob- al pandemic, are operating under the assumption that the previous way of working in an office is the ideal to which companies should wish to return. At the other end of the spectrum, you have companies like REI making drastic changes, ditching their brand- new corporate headquarters alto- gether, while tech giants like Google, Facebook and Twitter, which can better afford to allow their campuses to sit relatively empty, are enacting longer-term work-from-home poli- cies for thousands of employees – a trend that likely will accelerate in the coming weeks and months. With the wide variance in approaches, it’s more important than ever that each company’s real estate solutions are rooted in reality and an eye not only for what will work for their business and employees now, but what will enable them to be at their best in the future. One option? Adopting a more flex- ible and cost-effective approach to officing that supports workforce pro- ductivity as well as collaboration in a safe setting. n Bringing teams back together. Just like Zoom calls have supplanted that all-important element of human con- nection, remote work has exposed the limitations of collaboration due, in large part, to the constant inter- ruptions of daily life at home. In fact, a recent study from Ginger, a mental health benefits system, revealed this month that 70% of people say they are less productive at home than they are at work. This shouldn’t come as a surprise. While the massive work-from-home experi- ment certainly proved that we can work from home without the world falling apart, it does not mean that we are at our best there. While work- ing from the couch is convenient, many of us simply aren’t set up to maximize our productivity at home, not to mention the intangibles that make a workplace great – friend- ships, company culture and other perks – are much less accessible today than they were at the outset of 2020. As companies reevaluate their long-term office plans, some compa- nies are considering low-cost tem- porary space for employees to meet and maintain their company culture. Shared workspaces, many of which already are equipped with sizable pri- vate offices or conference rooms, are a logical place to start. Using these sorts of spaces on an as-needed basis can give employees a place to come together in small groups, bringing back that camaraderie and collabora- tion that are missing with a remote- work set-up. Whether space is reserved to allow for in-person onboarding, team and board meetings or new business presentations, this can signal a com- mitment to employees and clients that their experience matters – even if looks a little different. Their con- nection to one another matters. Who knows, this time together might even spur the company’s next big idea. n Increased flexibility. Since its inception more than a decade ago, the coworking industry has been celebrated for offering benefits that traditional office real estate simply can’t. Chief among them is flexibility when it comes to structuring and signing a lease. While coworking at first appealed to upstart freelancers and indepen- dent contractors, large corporations, especially those accustomed to a sat- ellite workforce, approached shared workspaces as an increasingly viable way to maintain a physical, afford- able presence in places where their employees lived and worked. In addition to a dedicated business address, a coworking desk or private office provided employees with a centralized touchdown point and had the ability to “wow” new or prospec- tive clients, all without committing to a standard seven- to 10-year lease. Instead, shared workspace mem- bership agreements typically range in length from one to two years, allow- ing companies the flexibility to scale their workspace needs up or down based on current needs and business projections. Coworking’s high degree of flexibil- ity will only become more important as we grapple with the impacts of the pandemic. Aside from headcount, office space tends to be one of the largest expenses for a business. Hav- ing the flexibility to scale as needed will be a determining factor in the office market for companies of all sizes moving forward. Much like the unpredictabil- ity of COVID-19, only time will tell how – and when – the office sector rebounds. While some of the coun- try’s largest organizations have set a new precedent for work for the foreseeable future, the most impor- tant thing business owners can do is figure out what is right for their own employees and provide what they need to be successful. Whatever the solution, if this year has taught us anything, it is the importance of remaining adaptable. Any solution that gives your employees the ben- efits of in-person collaboration with the flexibility to scale as needed feels like an all-too-rare thing these days: a pretty safe bet. s How flex space will impact future workspaces Grant Barnhill Founder, Shift Workspaces A hybrid approach of traditional office space, coworking and home may fit well into the future of office demand.