Coworking space at the former Blue35 in Grand Rapids. Coworking space at the former Blue35 in Grand Rapids. COURTESY PHOTO

Uncertainty in coworking space market causes creativity, flexibility

BY Sunday, January 17, 2021 05:36pm

The COVID-19 pandemic has led to widespread uncertainty about the future of commercial office space, including for the relatively new sector around coworking, or flexible workplaces.

David Wiener, senior vice president of Colliers International’s West Michigan office, said the coworking office market is currently frozen with little activity in new spaces opening while most coworking spaces in larger metro areas remain mostly shut down because of COVID-19 restrictions.

“There are a number of issues that we’re seeing,” Wiener said. “It could depend a lot on what type of regulations there are locally or from the state. In 2021, if a lot of people can get the vaccine and get people back to work, then I think things will change. But right now most people are seeing coworking not coming back fully until 2022.”

Coworking spaces provide flexible leases for workers, including freelancers or contractors, seeking office space. As the COVID-19 pandemic sparked a widespread shift to working from home, the future of coworking spaces remains unclear. They could play a larger role if companies scale back their office footprints and opt for more flexible spaces for employees, experts say.

“Locally, they’re just trying to weather the storm and see what will happen,” Wiener said. “Nationally, we’ve seen a lot (of coworking businesses) cut their staff and they are not able to have any revenue coming in.”

The Treehuis coworking space in downtown Holland at 31 E. Eighth St. started off strong in 2020 and in a healthy spot financially, said owner Brian Burch, who is also managing partner at Holland-based public relations firm Burch Partners Inc. Then the statewide stay-home order “decimated” membership, Burch said.

“When people said, ‘Hey, I can do my work at home,’ that’s exactly what they did,” Burch said. “The decision to keep people in their homes had ripple effects throughout the year, but since that order was lifted in June we’ve clawed our way back.”

Seeking a ‘third space’

Despite the pandemic-related uncertainty, experts predict coworking spaces to continue growing over the next decade. Commercial real estate firm JLL has reportedly predicted that 30 percent of all office space will be flexible by 2030, while other reports have shown the amount of flexible office space in the top 23 U.S. markets increased 2.5 percent through the third quarter of 2020 compared to 2019.

All of Treehuis’ permanent members who had their own permanent desk at the coworking space stayed with the business, but the number of members who work out of the space a few times a week has declined, Burch said. The space also hosts meetings and events, which have not been able to take place in 2020. 

A Paycheck Protection Program loan got the business through summer months, but the fourth quarter of 2020 was “horrific once again,” Burch said. 

Still, Burch is optimistic that the coworking model will remain an important piece for many employees long term by serving as a crucial third space outside of an office or home. 

If more companies downsize office spaces, more people could turn to coworking spaces in the interim as well, he said. 

“They just have to get out of the house, and you can’t just go to coffee shops or to the places they are used to going to get work done,” Burch said. “What we’ve done our best at is to create those private spaces where members are not sharing the same area with people like they once were.”

Treehuis now has “phone booth” rooms for Zoom calls which are semi-private, as well as sanitizing stations and strict COVID-19 guidelines, Burch said. 

“I think the work from home trend is happening but I don’t think that’s a long term trend that is a viable solution,” Burch said. “People want third spaces to work.”

Wiener sees larger companies, in particular, becoming more flexible and therefore attracting interest in coworking spaces. This is also true of the office market in general, where there has been an increase in subleased space.

Getting creative

Custer Inc.’s coworking space, WorkLab, at 99 Monroe Ave. NW in Grand Rapids was recently listed by Colliers to promote subleased or shared lease options because the company is struggling to find people to occupy coworking and meeting spaces during the pandemic, said Vice President of Education and Strategic Accounts Mark Custer. The office currently remains a coworking space.

As some larger companies are condensing or eliminating office space during COVID-19 restrictions, people still need and desire office space, Alysha Lach White, owner of Little Space Studio LLC, said last month during a MiBiz roundtable. The coworking space at 111 S. Division Ave. in Grand Rapids caters to creatives and business professionals that are part of the gig economy or are freelance-based. 

The pandemic halted the launch of the company’s membership program as well as construction planned for the business’ second floor within the Harris Building, which is slated for more permanent office space for members.

“Coworking is just not popular right now,” Lach White said. “(We are) taking in the reality that our industry is fundamentally changed, but because we’re serving creatives we were really agile and realizing how we could pivot some of our business models.”

Little Space launched a digital membership that wasn’t part of its business plan pre-pandemic, Lach White said. The company is also teaching staff how to produce live-streamed content, and it just added a professional recording studio that is available for booking, she said.

“We definitely had to take time and pace ourselves because we were so tight on funds, but at the same time it allowed our membership to see under the hood and come along with us and see us build piece by piece,” Lach White said.

Lach White sees a future for coworking spaces, particularly those that are set up to serve creative professionals and allow for meaningful networking, she said.

“We’re getting even more requests now for office space and for memberships,” Lach White said last month. “And we’re up to 55 members already. Most are digital, but
a lot of them are waiting for our second floor to open.”

Little Space has also seen new interest from potential users, including a new partnership with Local First, which had to condense its office space and is now working out of Little Space, Lach White said.

“When you’re surrounded by people who are struggling, you get really creative to meet people’s needs,” she said. 

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