One of the early research notes I wrote at Gartner in 1999 was on the executive suite operator, Regus. I was intrigued with this company in the context of mobile office alternatives. Regus provided high end fully serviced and provisioned office space for individuals or small groups on various pricing schemes. Regus was growing quickly butsuffered from the tech bust in the early 2000’s and went bankrupt in 2003. Regus has since recovered and is now one of the leading providers of executive suite offerings.
I recently revisited the subject of co-working and discovereda huge industry that spans the globe with over two thousand locations, principally located in major metropolitan areas such as New York, Chicago, San Francisco, London, Hong Kong, etc. Co-working as distinct from executive suites like Regus, was invented in 2005 by an entrepreneur, Brad Neuberg, who started a cooperative called the “Hat Factory.” It was a small team of tech workers who formed the nucleus of the co-working site and now the concept has grown exponentially with over 2000 co-working locations worldwide.
The primary driver of this growth is the rise of the contingent worker, which represents about one third of the US workforce according to government estimates. With the advent of mobile technology and cloud computing, millennials, those between the ages of 20-35, seek non-traditional work environments as well as a sense of community. Co-working meets these needs by offering informal and edgy workplaces, and a spectrum of services that might include WiFi, marketing training, social events, and even conferences aimed at the young, independent entrepreneurs.
One of the fastest growing co-working companies is WeWork, founded in 2010, by Adam Neuman and Miguel McKelvey in New York City. WeWork is now the fastest growing lessee in the United Sates. It now has over 52 locations and is reported to be adding 3-5 locations per month. With 45,000 members, WeWork recently received new financing of $355 million, and is valued at over $1 billion. It enjoys a 40% profit margin, with a 98% occupancy. Investors include JP Morgan Chase, Goldman Sachs, and Mort Zuckerman who is also a key board member. WeWorkprovides a broad spectrum of services and amenities, including free beer, as well as offering group health insurance. Pricing starts at $45 per month for entry level membership up to $500 per month for a private individual office.
WeWork is diversifying by planning entries into other markets. It’s reported that they have several follow on services in the works, including “WeLive” combining office space with micro-apartments, and “WeSleep” an Air-B&B like hotel concept.
One possible market for co-working is the corporate real estate market which could use a co-working service as an extension of its office locations. Sun Microsystems pioneered this concept back in the 1990s with its “network of places” program. Sun opened telework centers in major metro areas as alternative office locations for its mobile workforce. The federal government has also established telework centers in and around major metro areas as a way to reduce commute time.
There’s no question that co-working fills a real need for the young independent worker who desires non-traditional work environments and the social benefits of working with others. It’s rapid growth underscores the problems with telecommuting or work from home such as loneliness, lack of stimulation, and the absence of colleagues and mentors.