The way we work is changing. Firms of all sizes, across a variety of sectors, have increasingly started to supplement the traditional office spaces within their core real estate portfolio with a range of flexible and shared office concepts, such as co-working, in order to provide a choice of settings to their employees.
The growth of co-working in recent years has been impressive. JLL estimates the size of the global co-working market to be in the region of circa $210m (£150m) a month, and the number of individuals using co-working spaces is predicted to reach 1 million by 2018. Take-up of co-working space in London has grown exponentially, with 10 per cent of all the office space leased in central London in 2015 being provided by serviced office providers, many of whom offer co-working spaces, up from 4 per cent in 2013. The appeal of co-working has not been lost on larger firms, with big corporates embracing this new style of working.
Co-working in tech
The growing technology sector has demonstrated a significant capacity to utilise co-working spaces. The city of Liverpool, for instance, identified such arrangements as being an effective way of expanding the tech sector and set about creating a number of co-working spaces in the city, many of which exist in an area known as the ‘Baltic Triangle’. The reasons for the surge in tech firms, particularly tech start-ups, using co-working spaces are manifold.
For starters, tech start-ups, especially in London, are already on the move. The capital has witnessed a number of tech and media companies moving into cheaper premises in East London. Such is the extent of this movement that for every sq ft. of floor space given up by a tech or media firm in Aldgate, Clerkenwell, and Shoreditch, an extra 8 sq ft. of floor space was leased to a new tech or media company.
And whilst larger tech and media firms continue to utilise large office spaces, for example Google’s 863,000 sq ft. office in King’s Cross is rumoured to include a swimming pool and airship docking station, smaller firms, along with start-ups, who make up 98 per cent of tech companies, are demanding less space on an average deal basis, but are demanding more from that space. The rise of small tech businesses has led to more real estate activity but has resulted in an office footprint that is on average 44 per cent smaller in 2015 than it was in 2013. The same is true of media companies, with the average office footprint falling by 22 per cent within the same period.
Rents paid by tech and media companies rose by £9.40 per sq ft. between 2013 and 2015, equivalent to a 21 per cent increase. As companies battle these rising rents, tech firms are eager to drive efficiency across real estate portfolios. Cost reduction is not typically the primary driver of co-working; nevertheless, it can create an opportunity for more efficient utilisation of space, helping companies to optimise costs without compromising on the quality of the workspace.
Collaboration and innovation
More importantly, co-working is centred on creating space which supports collaboration, openness, knowledge sharing, innovation, and the user experience, which extends co-working’s appeal to the more traditional industries, eager to tap into these benefits. Demand for co-working space has been driven by the growth of creative and tech industries, as well as the changing nature of work. If utilised correctly, tech firms can expect not only to promote the efficient use of space but also encourage a culture of innovation, openness, and collaboration. In the Global Coworking Survey 2012, for instance, 71 per cent of respondents said their creativity had increased since moving into a co-working space, and 62 per cent said their standard of work had improved.
Our recent report, ‘A New Era of Coworking’, showed four different models that businesses can adopt in order to enjoy the full benefits of co-working:
The creation of an innovation hub exclusively for employees within a company’s own office. This helps to drive internal collaboration and signal to the new generation that the company is open to the new ways of working. However, it is worth noting that this model does create limited exposure to external collaboration.
Co-working membership model
This sees companies and individuals purchase memberships to access other co-working spaces. This can provide a greater variety of workplaces and allow companies to accommodate fluctuations in workforce numbers. External memberships also provide a range of work settings and help companies to tap into new networks and keep a pulse on market developments without any costly modifications to their existing buildings and potential disruption to the wider company culture.
External co-working space
Acollaboration space for employees shared with external organisations/individuals in an external co-working environment. Here tech start-ups can find themselves surrounded by other like-minded companies, allowing for the free exchange of advice and ideas.
The internal co-working space
This sees firms open up their offices to external firms or individuals. Not only does this help engender the climate of collaboration, but gives access to talent, knowledge sharing and the opportunity for innovation.
Although all the models provide plenty of advantages for firms they do naturally pose some challenges, particularly with regards to cybersecurity and data protection – though these can be overcome with careful planning. Companies seeking to utilise co-working should see cybersecurity requirements as a prerequisite for effective flexible working and put in place policies that reflect the new and mobile way in which their employees are working.
Once recommendations have been made – separate servers or private WiFi networks, for example – and a policy developed, the procedural elements must then continue to evolve alongside the on the ground reality of co-working. As co-working arrangements develop, and the way the employees and company work changes, so too the cybersecurity arrangements must adapt.
The bottom line when it comes to the tech industry and co-working is that tech firms are playing a significant part in driving the popularity of this way of working. With careful consideration of their strategic objectives and available options, tech businesses, regardless of shape or size, can effectively utilise co-working to their advantage and start to see the benefits it can have for their business.
John Duckworth is Lead Director – UK Occupier Services at JLL