If you’re a student landlord with a diverse portfolio that includes commercial properties, the co-working trend is one that should be piquing your interest — in one way or another. But what exactly is co-working, and is it an area that’s worth investing in?
What is Co-Working?
Co-working removes the need for businesses to find, let, and maintain their own premises, instead becoming a temporary business tenant in a shared and managed commercial building. Working alongside others, co-working spaces are said to drive creativity and friendly competition, and make it easier for startups to succeed. It’s estimated that small enterprises employing less than 50 people could save between 25% – 30% on rental costs by choosing to work from pay-as-you-go co-working spaces.
Co-Working in University Towns
While the co-working trend has emerged all over the country, it has grown rapidly within university towns especially. When the new semester started in September 2019, Bristol University hit the headlines for attempting to move more than 100 first year students to accommodations over the border in Wales, and while this was property related, rather than work space related, it highlights the fact that universities are running out of space
Whether it’s office space for professors, storage space, lecture space, or seminar space, the availability of space is something that is affecting universities and other educational establishments today. Universities have short-term real estate requirements that can be met through co-working spaces which eradicate the need for a long term lease.
Current State of the Co-Working Market
Reports show that the current co-working market is strong, particularly across the UK’s regional cities. Outside of London, an additional 800,000 square feet of flexible workspace — a term used to describe co-working spaces and serviced offices — was acquired throughout 2017 and 2018. It is estimated that, by the end of next year, workers will be able to choose from than 26,000 co-working spaces all over the world.
The strength of the market is undoubtedly driven by the ever increasing number of startups being introduced in the UK. Last year, the number of new technology companies alone rose by 14%. With access to finance being one of the biggest challenges affecting startups, it is not surprising that small businesses are actively seeking cost-saving solutions that leave them with more resources to grow.
Fad, or Here to Stay?
It appears safe to say that co-working isn’t a fad or a trend, and is likely to stick around for the foreseeable future, at least until the occupancy issue is addressed. Occupancy in office spaces has been a growing concern for many years as flexible and remote working policies have become more common in the UK. Remote working is on the rise; a by product of new communications technologies and cloud computing that enable employees to access vital information and communicate with colleagues anywhere, at any time, using a single connected device. The result? We’ve got fewer bums on seats.
Research shows that the average desk is occupied for 40% of the working day, suggesting that businesses are not deriving full value or making full use of the work spaces that they pay for. While occupancy continues to be a problem for businesses, we can expect the co-working movement to continue in its upward direction.
The Future of Co-Working
Although the co-working market is expected to remain strong, it is anticipated to change. The recent problems experienced by WeWork, a New York-based co-working organisation that has dominated the American market, highlights this. The company recently accepted a billion dollar rescue deal after struggling to generate profits, and the situation acts as a prediction that the future of the co-working space. It is expected that co-working will become less about working from a single location, and more about greater flexibility; the future isn’t dominated by one or two major players, but is instead made up of independent venues in every town, in every country, in every continent.
For student landlords looking at options to diversify their portfolio or derive greater value from their commercial properties, co-working spaces is an interesting area to explore. While no one can guarantee that the co-working movement is here to stay, all signs point to it being much more of a long-term trend rather than a flash in the pan.