Coworking: an international view and real estate considerations for the Middle East
Deemed by some as revolutionary and by others as undermining the ever-developing coworking sector has confidently arrived in a global fashion, where it seems set to stay and to grow.
Whether it is working from home, working remotely, telecommuting, vidcon appearances or setting up in the corner of a coffee shop, the geography of work has changed drastically in the last decade. With that in mind this article looks to describe coworking in a practical sense, to identify its place and value in the market, to mention how coworking has reacted to coronavirus, to analyse its importance as a real estate concern generally and to look at coworking in the Middle East.
What is coworking?
Coworking in its simplest form places workers from different organisations in one shared space and leaves them to get on as if they were, in actuality, working from their respective organisations' offices.
In closer detail, however, coworking is about creating a commercial ecosystem on a resource-led basis to minimise costs, maximise flexibility and deliver independence to a workforce on any scale. There are multiple interpretations of what the value of coworking is, and many naysayers, but the offering of a non-traditional community workspace designed to encourage cohesive enterprise has entered work cultures across the world so must be acknowledged.
At the core of coworking are the spaces which facilitate it. Without a competitive edge, whether it is logistically, industrially or creatively conceived, those spaces would not function. In short; coworking is so far evolved from hot-desking or using services offices, a niche investor and operating market has come to exist.
Why are coworking spaces important?
Having identified the practical core of coworking as the space in which is happens; the primary driver behind adopting a communal approach is an economic one. The cost-saving possibilities for an organisation choosing to use a coworking space seem vast, and include:
- User agreements, being short leases, pay-as-you-go arrangements or otherwise, are inherently less cost effective and onerous than more traditional office leases;
- Along with being more cost effective, the flexibility offered in short term arrangements (i.e. a short fixed term, or a short notice period) appeals to many and in particular start-up ventures;
- Ready-to-go units that are reliably set up for immediate access and use, being served by combined, outside teams for things like maintenance, service and refreshments;
- Opportunities to diversify a workforce, owing to lessened time and space restrictions, where individuals whose circumstances might be incompatible with an upper-floor, 9-to-5, closed door, traditional office model; and
- Networking availability both incidentally by getting to know the neighbours, or deliberately by collaborating in a shared, chosen space.
Downsides to coworking spaces
Accepting still that coworking has brought great positive changes, there are widely acknowledged drawbacks that crop up in discussions about the merit of such spaces. In broad strokes these are:
- Oversight, supervision and training can be more difficult to deliver in a non-dedicated space. In organisations where there are juniors, are structured way of handling their development (for example, being sat with a relevant mentor) can be less viable in a coworking environment;
- Impermanence is often cited as a negative, where employees feel that occupying an office space for a year at a time impacts their productivity, not to mention the risk that in moving offices certain staff members may become alienated by travel time or area association; and
- Capacity in busy times, where organisations find themselves short of resources or space when an unforeseen rush arrives. This, of course, can happen in a traditional office model but in a shared building the liberty of spreading out on short notice can become territorial and time consuming.
Coworking in times of COVID-19
The fast-moving international situation which exists at the time this article is published, with the viral pandemic affecting every business in some way, must be mentioned in context of shared workspaces. Coworking spaces are at an apex point from a purely business perspective, when it comes to the virus. Being generally cheaper than a traditional set of offices, the financial exposure by the office lessee may be minimised, for example, in times of abandonment by quarantine.
Those who are continuing to cowork, where permitted, may be benefitting from a lack of personalisation where workers have seen their setup as quite transient: there will be less clutter, less physical interaction and maybe less likelihood of someone feeling duty-bound to attend a temporary space.
Proponents however of the need for greater isolation during the current crisis have been quick to identify coworking spaces as something of a hotbed for passing, random interaction with people and as such identifying risk.
Whatever stance is taken the COVID-19 situation has forced businesses to review how their operations can continue in a fluid and practical fashion when external factors weigh in. When the situation stabilises it will be interesting to see whether the increase in working from spaces outside of a traditional office has knock-on effects on those traditional models, and whether there will be an upturn in the use of ad-hoc coworking spaces going forward.
On balance though, there is no clear decider as to a benefit or not from coworking in the face of a pandemic but in equal measure there does not seem to be backlash or panic focussing on such environments. There are reports from the USA and from India of partial closures in some places, and of additional cleaning charges in others.
We would recommend that if you are affected by this, or feel you may soon be, take a look at our recent Insight publications on the topic, including: "Coronavirus – a force majeure event?".
Coworking as a real estate concern
In a market focussed on millennial and scrupulous disruption (think about your takeaway delivery, dry cleaning pickup or on-demand shows) it would have been impossible for commercial real estate to stand untouched.
A desire for flexibility is documented as the most pressing reason behind a move away from the landlord and tenant relationship for an office lease, and branding comes in closely behind that. This means that the foremost real estate consideration is on the part of the landlord: steady, long-term revenue streams with agreements in place which are widely understood and adopted (i.e. repairing obligations, restrictions on alterations and fixed time and type usage) are perhaps now under scrutiny. One evident response to this, however, for lettable premises that could be operated as a coworking space is for the landlord to rebrand it as such and to test the value that can be attracted per square metre. Coworking spaces, by their very nature, yield higher than 'regular' offices.
The idea of creating a premium for open spaces translates to vacant units too. In a sense, coworking arrangements can be seen as the Airbnb of the office world.
Coworking in the Middle East
Regionally the impact of coworking spaces is, as yet, difficult to quantify. This is certainly not to suggest that the notion has been late adopted, but simply that delving into quantifiable data can be opaque. In context of this article we must be mindful of COVID-19 in considering the future of the Middle East's acceptance of communal working spaces, as this will likely see an eventual uplift (as with much of the working world).
Looking at Bahrain numerous high profile developments are stationed to offer coworking opportunities. In particular with the Kingdom there is availability for short-term bookings, where businesses can use an office for a day at a time. Benefitting as a financial hub in the region, Bahrain suits this level of flexibility, as organisations may work globally and only need to be back on the island for weeks at a time. Self titled "innovation hubs" have also been made available in the country, with a view to using coworking offices as vehicles for collaboration.
The UAE seems to have quicker become comfortable with coworking spaces; as some publications cite up to a 30% loss of value-per-chair in traditional setups against a minimised loss in smaller, undesignated workspaces. This appears to have been particularly attractive to start-ups in the Emirates. It has also been noted that communal facilities that have sometimes been at a premium (for example car parking or conference rooms) in traditional office complexes in the UAE can be more sparingly managed with the flexible approach that coworking spaces offer.
With freelance visas now available in Dubai, as a practical example, the availability of low-impact, rental spaces for individuals needing a space larger than the home office has opened up an actual market for coworking spaces. This goes hand-in-hand, as mentioned above, with start-ups.
With the decline in popularity of traditional office space (see above in this article) the potential for office space to be converted quite quickly into single-rental, or group coworking spaces with accessible, shared facilities could feasibly be a future trend.
The future of coworking?
In immediate terms it is uncertain whether the COVID-19 pandemic will leave the traditional model behind: the fact that so many people have shifted, overnight, to working remotely will undoubtedly shine a light on the value that some organisations put on having a stationary physical presence. It is believable that coworking could offer a middle ground answer to this quandary. The idea of having a flexible space that allows for meaningful group cohesion, but also allows for the effective parts of a work-from-home impetus, may be appealing.
In the longer term; broader awareness of environmental and societal responsibilities seems to be pushing the built environment towards technological smartness and connectivity, giving rise to an overhaul in how ergonomy is valued.
Whatever the practical result there will always be pressing needs for the relationship between landlords, licensors, tenants, licensees and any of the other parties involved in handling commercial property, to be properly managed. This is not to mention the importance of striking a commercial and competitive balance between flexibility and commercial viability in workspaces themselves.
Effective negotiation at the outset and throughout the term of a coworking relationship is key; please do not hesitate to be in touch with us to discuss your next coworking project, or upcoming plans for a coworking space.