While we tend to focus solely on the coworking and flex workspace markets in these posts, our industry certainly doesn’t exist in a vacuum. As we learned over the past two years, external global forces have a big impact on the performance of the industry as a whole.
The pandemic has, for all of us, felt like a very long haul, and although it is not over yet, there is a growing sense in many countries of having turned a page. However, this has not led to a period of tranquillity, as factors derived from the pandemic such as problems in global supply chains, or others such as the invasion of Ukraine, uncertainty about Taiwan and the production of microchips, or the growing Monkey Pox concerns keep us on constant alert and continue to paint a picture of uncertainty, at least in the medium term.
In this environment of heightened uncertainty, choosing a flexible workspace instead of an office seems a much safer option than opting for a traditional rental with much less flexibility associated with it. This is especially true in those countries where regulations or practices in the local real estate industry are even more rigid than usual.
As we get into some of this year’s big trends, bear in mind that the timings mentioned in the post may vary a bit depending on where you are in the world and when you read this article.
In the second half of 2020, many flexible workspaces saw the requests they had to deal with multiply (although the conversion rate plummeted from pre-pandemic times). However, it wasn't until 2021 that these requests started to convert in a meaningful way, as up to that point, in most markets, potential users had been just testing the waters in, what for them, was a brand new way of working.
As the situation improved we saw how some spaces, at the end of 2021, began to prepare for 2022 with stronger demand and a willingness to pay "market" prices. These spaces began to communicate to their customers who had been offered significant discounts (which were needed to attract customers during the hardest part of the pandemic) that their new contracts would have no discounts and they should pay full price.
The pandemic also brought with it a time of hyper-flexibility in which many services were marketed on a pay-per-use basis, which had been far less common before the pandemic. With the withdrawal of restrictions, however, and the growing mindset of learning to live with covid, there has been a significant reduction in that uncertainty. This more laissez-faire attitude has also been incentivised by workspaces and the guarantees they can offer new members when signing a contract, leading to potential users being able to commit to signing contracts at a similar duration to those prior to covid’s emergence.
The fight for leads has been more complex than before the pandemic but certainly not as complex as during the pandemic. During the two years when demand was very low, new spaces have been opened and needed to be filled, in addition to those that were emptied during the pandemic years. The significantly more congested and competitive marketplace meant it was easier for the customer to get a more competitive price.
For some operators, this is a thing of the past as of this year, and even in the last quarter of 2021, when some operators have reached record occupancy levels. However, these operators also say they are surprised by the low use of space by some of their customers: the impact of work from home and hybrid working policies is still noticeable. The low use of space is for many a reality despite the fact that some pandemic schemes are maintained, such as allowing, for example, a 20-seat private to be used non-simultaneously by up to twice as many users (a practice that was widespread in 2020-2021 but to which they are now trying to limit).
For other operators, however, the story has been different and they still continue with prices below their pre-pandemic levels, leading to high occupancy thanks to the diverse methods they are using to close those leads that are resisting them.
What factors make the difference between how these spaces have navigated the waters of the first half of 2022?
Obviously, the health and economic situation in each country has a direct impact on the state of flexible workspaces in that region, country, or city. However, when different spaces in the same region are performing at very different levels the factors affecting these spaces must be different.
One of the key factors is the location of the space and what audience it is targeting: how the sector of their target demographic is performing will dictate the level of success at which the space is performing (and at what price it is closing its leads). For example, one of the types of clients that are hiring in coworking (this is nothing new) are startups and technology companies, although as we mentioned they have flexible policies that allow employees to work from home if they wish. This is down to the difficulties in retaining and attracting talent and these companies use all the tools they have at their disposal to do so (hence the often low usage rate of the space).
Another incentive for companies to take advantage of are 2-for-1 or even 3-for-1 policies, whereby they can have 2 or even 3 three times the amount of users in a private office than it has space for. Due to hybrid working policies and other factors, this is a more cost effective and flexible way for businesses to rent flexible office space. In these cases it must be taken into account that additional users cause an extra cost to the space, however, due to increased admin and other expenses.
The spaces that have more problems to overcome are those that target customers who are experiencing difficulties and/or perceive the price of the service offered as excessive: I think that although the world is too wide to generalise and there will be many endemic factors and specific particularities of a space, it is relatively safe to infer that in many cases we are talking about spaces focused on the lower end of the market and that are unattractive to customers with a higher purchasing power.
Now we can only observe how the market will evolve in the coming months and wait for 2023 which, hopefully, will show us that the best is yet to come.
Subscribe to receive our latest content and news directly to your inbox
If you didn’t already know, #InternationalCoworkingDay falls on 9 August every year and is celebrated by coworking operators and their members everywhere. Why not celebrate for the entire week and use our 5 ways to celebrate for some inspiration on how to mark the occasion!
At the heart of the entire concept of coworking and what sets it apart from traditional offices, is the sense of community they create between their members. Here we look at how you can achieve this and the key things to consider.
Nexudus is 10 years old! To mark this special occasion we wanted to take a look at how far the platform has come over the past decade. Take a trip down memory lane with us in this special Nexudus retrospective.
Over the past few months, our Nexudus Insights reports have been taking a look at how meeting rooms and other resources are accessed in coworking and flex workspaces in different markets. This article sees Marc Navarro take a look at what the different findings say about working habits in the UK, US and Spanish markets.
Many of you may have already heard quite a lot about the Metaverse, but have you considered what it means for coworking and flex workspaces? In this article, we take a look at how the metaverse might influence the future of work and coworking.
With the concept of the 15-minute city becoming more popular, there are lots of opportunities for coworking to take advantage of. Discover more about the concept and how coworking fits into it in this fascinating article.
In the final article of our series on niche coworking and flexible workspaces, we take a look at how some operators have crafted specific spaces for film industry professionals. So, take a look at how these spaces are set up to fit the needs of this very specialised industry.
The next in our series of articles looking at niche coworking spaces for specific industries is all about spaces for scientists. These spaces have become increasingly popular, and are hyper-specialised to suit the needs of their members.
Following up on our previous article on niche coworking spaces, this week we take a look at four spaces designed specifically for the video game industry. With the gaming industry being with more than the video and music industries combined, this certainly could prove to be a profitable niche to move into.