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

Tracking Retail Closures

At Fourth Economy we have been tracking the news about retail store closures.  These store closures often can leave significant redevelopment challenges for local community and economic development officials. In future posts we will highlights some of the ways that communities are dealing with these buildings. According to Business Insider more than 5,000 store closures have been announced so far, with the potential for nearly 9,000 store closures by the end of 2017. These store closings are the most physical manifestation of the challenges facing the retail sector.

As a resource to the community, Fourth Economy has started to identify and compile a list of retail store closings. Tracking down the locations has proven to be a challenge, but we have identified 1,768 of these closings so far.  You can see the results in the above Working Map of Retail Closings, created in Tableau Public.  We are providing this as a resource to the community and will continue to update it as closings are announced and locations identified.  If you know of any closings in your area, please send them to engage@fourtheconomy.com and we will update the map.

Stay tuned for more.

Co-authors: Jamie Reese & Katie Grauer

New Economics of Land Use

A great American poet once said, “For the times they are a-changing.”  That is especially true today in our economy. Underneath the radar of the rhetoric and public spotlight, the changes in the economy are generating a ripple effect for how industries and people use land.  Land use is not a topic that is top of mind for most people, but a few local governments are waking up to the reality that a number of forces are beginning to change the need for land, and ultimately its value.  Local governments care deeply about land use, or they should, because the value of land translates into the property tax revenues they need to maintain the community. Continue reading “New Economics of Land Use”

The Challenge of Creating Actionable Plans

Burket-Blog-Web-05-2016As part of our work in our hometown of Pittsburgh, we have been digging into all of the plans that have been created over the past five years or so. So far, we’ve found around two-dozen plans, reports, or studies on all manner of community, workforce, and economic development topics. Of those, about five have well-articulated goals, actions, responsible parties, though the form and detail of those components varies from plan to plan. And even with detailed actions, the degree to which those plans are being implemented varies a great deal. Our experience in Pittsburgh is not unique – we see the same trend in the other places that we work. So why is it, that despite our best wishes and intentions, it is so hard to create actionable plans? Continue reading “The Challenge of Creating Actionable Plans”

Regional quality of place and the fight against blight

BlightBy now, the costs of blight and vacancy are well-documented in terms of unpaid local and school taxes, drained municipal resources, further disinvestment, and/or declining adjacent property values.  We have also seen in from our clients the key role that quality of place plays in retaining and attracting talent – a key driver for economic success.  No matter the size, competitive communities create places where people want to live and work, and blight can be a major blow in that endeavor.  Continue reading “Regional quality of place and the fight against blight”

Inspire Yes, But Act As Well

Coffee-Shop-1099Tis the season for annual conferences – that chance each year for trade groups to tout their accomplishments and relevancy. The Fourth Economy team attended our fair share. What we find scary is that while the workshops and keynotes are conveying the seismic changes occurring in our economy, change on the street, in our communities and programs, appear to keep on keeping on as if it were, oh say, 1999. Many of the metrics for growth we heard remain focused on absolute land development, job creation (regardless of type and cost) and more office space.   Continue reading “Inspire Yes, But Act As Well”

What? Me Worry?

What-Me-WorryWhen people are looking for a safe place to live, they overestimate the danger from low-risk threats such as crime.  No one would say that they want to live in a high crime area.  The reality is that nationwide there are only 5.1 deaths per 100,000 people from homicide. Crime is highly distorted because the reporting of crime rises in areas with more people and therefore more full-time police officers.  Perceptions and fear about crime are always much worse than the actual frequency and risk of crime.  Continue reading “What? Me Worry?”

Survey: Environmental Factors and Site Selection

Air-Quality-SurveyWe are asking corporate real estate managers, location consultants and economic developers to identify how air quality affects location decisions.

 

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As an incentive, all respondents completing this short survey will have an opportunity to win a $200 prepaid Visa card. All respondents will also have access to the final results.

We appreciate you taking 10-15 minutes to complete the survey by Monday, October 17, 2015. Results will be used in summary form only in order to protect confidentiality. Continue reading “Survey: Environmental Factors and Site Selection”

Business Improvement Districts – Not Just for Big City Downtowns

Business-Improvement-DistrictsBy Dave Feehan
President, Civitas Consultants LLC

Since 1990, Business Improvement Districts or BIDs, as they are commonly known, have become the most effective and accepted method for funding downtown and business district organizations.

For many decades, merchant associations and voluntary downtown councils played the role of business district manager and advocate; but the decline in downtown retail, the shift to national chain stores, and the acquisition of local headquarter firms by national and international conglomerates made these downtown management models difficult to sustain. Continue reading “Business Improvement Districts – Not Just for Big City Downtowns”

Balancing Energy, Air Quality, and a Sense of Place in Pittsburgh

Air-QualityOn Monday June 29, 2015 the United States Supreme Court brought air quality into the limelight when it ruled that the Environmental Protection Agency failed to fully consider the cost to energy producers of limiting air emissions.  While the need to balance the costs of regulation against the intended social benefit is nothing new, the highest court of law held the EPA to that standard just months after the Urban Land Institute reported in America in 2015 that quality of environment (including air and water quality) is the top community attribute priority for people choosing a place to live in 2015. Continue reading “Balancing Energy, Air Quality, and a Sense of Place in Pittsburgh”