Co-Working Categorized: People and Places in an Emerging Market

Over the past decade, co-working has grown from a niche offering to having a significant impact in terms of the commercial real estate market — and providing a new alternatives tailored for remote and independent workers and small teams.

This summer, Fourth Economy was engaged to create a market assessment for the co-working market here in Pittsburgh. As a part of that effort, we reviewed a volume of existing secondary research that answered questions similar to the ones that we were looking to answer in Pittsburgh: what is the market capacity for co-working? Who is the co-working market? And, as we’ll address in this blog post, how is “co-working” defined?

What is co-working?

The Oxford Dictionaries define co-working as “the use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas and knowledge.” The general definition was reiterated in the reports we read the most closely *. But this definition doesn’t help narrow down on what the boundaries of co-working are, ranging from a desk one can rent for a few hours to a serviced office space one can rent for a team of 15 workers. Reading them more closely, these reports tended to define co-working, and view the co-working market, through either a real estate-centric or a workforce-centric lens, depending on the benefits or targets of co-working they focused on.

Real estate-centric

Deloitte’s report defines co-working as a “membership-based workspace with a monthly fee giving access to a desk, office space, Wi-Fi, and other amenities.” The real estate-centric definitions focused more more on the short-term lease and flexible membership benefits of co-working, rather than its community-based or knowledge-sharing aspects. In this framing, co-working is usually lumped in with professional serviced office spaces like those of Regus or WeWork; the different work styles of serviced offices and co-working (specifically, the social difference between working in an open space close to other co-workers, as opposed to in a small rented office with shared amenities) are not emphasized.

This is also reflected in the types of co-working spaces many of the reports we read measure: because their focus is on the commercial real estate implications of co-working — both for the entrepreneurs or remote workers who are co-working tenants and for the co-working operators (like WeWork or Regus) — these reports tended not to measure locally-run co-working spaces.

Workforce-centric

The workforce-based definitions were centered around the culture of these spaces. This approach highlights the types of worker (e.g. self-employed, entrepreneurial, etc.) as well as the collaborative and innovative elements of the space. For instance, in their “The Work Shop” report, CBRE describes co-working as “the best elements of a coffee shop (social, energetic, creative) and the best elements of a workspace (productive, functional)” combined to give workers the opportunity for an affordable, shared space. This definition explains a general value proposition for co-working — but elides how that value proposition differs across teams of different sizes and across the different types of spaces (from rentable private offices to shared desks) that may create a more or less collaborative co-working environment.

Our definitions

Given these different lenses through which to view the co-working market, how did we categorize the Pittsburgh market for our own study? We categorized it two ways: through identifying three main types of co-working spaces we observed in our market, and through identifying the different needs and motivations of co-working clients, from single clients through 8-person teams.

Three kinds of co-working

In the absence of one specific way to define what  co-working includes and doesn’t include, we focused our analysis on workspaces that allow for short-term, flexible lease terms with shared amenities (like kitchenettes and meeting rooms).

We segmented the Pittsburgh market into three rough categories, “Professional Co-Working,” “Community Co-working,” and short-term offices. Professional co-working spaces generally feel more corporate, may have more expensive furniture and finishes, may offer additional amenities like a front-desk receptionist, and are offered at higher monthly rents to reflect those factors.

Community co-working spaces are community-driven spaces with a neighborhood orientation that offer flex and fixed desk workspace at a lower price point than professional co-working spaces. They are similar to professional co-working spaces in that they offer a membership model (often with month-to-month leases) but differ from professional co-working spaces in, corresponding to their lower price point, they may not have professional operations or staffing (like a front desk), the finishes and furniture may be less expensive, and the technology and building operating systems (for example, for teleconferencing or climate control) may be more basic. The trade-off is the emphasis on relationships and community that community co-working spaces offer — as one proprietor told us, co-workers first come to their co-working space because of the space’s proximity to where they live — but stay for the community and connections. Community co-working spaces also differ from the other types of spaces in that they often have a specific community focus, like social entrepreneurship.

Finally, short-term offices range from serviced offices, executive suites, business centers, or other lease-negotiated and based-agreement that may encompass some flexible or open space. Short-term offices differ from either professional co-working or community co-working in that they are specifically offices for small teams, as opposed to flex or fixed desks, and because of their lease-based, rather than membership-based, business model.

Cultural benefits — and costs — of co-working

For the smallest companies, beyond the financial benefits, co-working represents a low-barrier opportunity to participate in a professional culture. For slightly larger companies, the larger culture of the co-working space offers the possibility to either benefit or disrupt the internal culture of the company, depending on how well-matched the two are. Teams of above eight or ten people already have a profound enough sense of cohesion and internal culture that the benefit of being in a co-working space no longer satisfies that need—and a mismatch between the expectations of smaller and larger companies (as contributors to the overall culture of the co-working space) can be a challenge.

The importance of definitions

Reviewing the existing set of definitions for co-working, and creating a framework for understanding the study for our own analysis, was critical to being able to paint a picture of this exciting emerging market for our clients that was as specific and actionable as possible — and helped give them, and us, some new language and tools for understanding how they fit into the market.

Want to talk to us more about co-working and other entrepreneurial supports in your community? We’d love to hear about the impact of co-working where you are. Email us at engage@fourtheconomy.com.  

*Including Newmark Grubb Knight Frank’s October 2016 report, “Scale of Disruption: The Sharing Economy’s Effect on U.S. Commercial Real Estate,” JLL’s “Shared Workspaces” report, NGKF’s report “WeLease: The Growth of Shared Workspace and Its Impact on the New York City Market,” Deloitte’s report “The London Business Footprint: The Growth of Serviced Offices,”Cushman & Wakefield’s 2015 report “Continuing the Evolution of Flexible Working,” and CBRE’s 2016 report “U.S. Shared Workplaces” and “Work Shop” reports