COVID-19 Prompts Rethinking of Coworking Spaces

April 21, 2020

Prior to COVID-19, coworking office spaces were surging in popularity. Rob Speyer, CEO of the commercial firm Tishman Speyer even called the sector the “biggest disruption to real estate since the invention of the elevator.”

Coworking has been a way for business owners and independent contractors to share space and cut costs. But as the outbreak spreads, the configuration of offices is being rethought.

Coworking companies like We Co. and WeWork are trying to restructure leases as demand for office space begins to shift. For most coworking companies, their business model relies on leasing spaces from landlords long-term and then subletting the space to office users under flexible terms. They tend to make more money by packing more customers on to each floor.

But under new social distancing norms, that business model may be more challenging. The commercial industry is already realizing that demand for open office layouts and densely packed offices could shift as workers return. WeWork said last week that it was “evaluating how our full-floor layouts can function to support distancing.”

Nevertheless, demand for furnished office space under short-term deals isn’t likely to disappear. “As more companies eschew long-term leases, adopt flexible schedules and let employees work from home, the flexibility of a coworking membership could become more appealing,” The Wall Street Journal reports.

As such, more coworking companies may switch from leases to revenue-sharing arrangements with landlords. They believe that could protect them better in any future downturns as that type of arrangement provides co-working companies greater financial flexibility.

Co-Working Envisioned the Office of Tomorrow. Suddenly It Feels Like the Office of Yesterday,” The Wall Street Journal (April 14, 2020) [Log-in required.]