COVID-19 is turning coworking spaces into cemeteries
Around a third of the world’s population is soldiering through various restrictions aimed at tackling the global pandemic. And with movement and nonessential work strongly discouraged across the globe, industries and economies are in tatters.
Among the worst-hit businesses are coworking spaces, which have not only been stripped down to the bones, but have become graveyards and, at worst, deserted spaces of vast emptiness.
Unlike traditional offices that require a significantly larger outlay on five- or ten-year terms, these shared spaces are typically very flexible, mostly offering much cheaper short-term leases.
This characteristic makes coworking spaces a no-brainer for solo entrepreneurs, small businesses (be it in the early-stage or growth-stage), and even medium-sized to larger corporates that could use some lower real estate costs.
But that same “flexibility characteristic” is also threatening the existence of coworking spaces in these uncertainty-fraught times.
With COVID-19 putting “work-from-home” on trial globally, the flexibility of coworking spaces is being tested beyond its limits. Tenants have walked away from shared offices, leaving office-sharing companies unable to pay landlords.
“As the markets brace themselves for a change, the uncertainty and volatility triggered by COVID-19 have definitely slowed down the rate of business across all spectrums of real estate within the past 6 weeks,” Neha Sahi, a property consultant at Pam Golding Properties Kenya, told WeeTracker.
“For coworking spaces, in particular, the rate of space absorption has slowed down significantly due to the safety measures that are required to be implemented during this time.”
The slowdown is crippling what is big business too
The global market value of flexible workspaces is estimated to be approximately USD 26 Bn. Up until 2022, the number of coworking spaces is expected to grow at an annual rate of 6 percent in the U.S. (even with the widely-publicized WeWork debacle), and 13 percent elsewhere. This is according to data from AllWork.
And here are some more numbers: there are approximately over 35,000 flexible workspaces worldwide, which represents 521 million square feet of flexible space. The amount of coworking space leased and its share of total office space rose by almost half in only 18 months, from the end of 2016 through mid-2018.
Furthermore, the average coworking space requirement continues to increase year after year, with the average client taking 7 desks currently. Also, between 2014 and the end of 2018, the number of flexible workspace locations expanded by 205 percent worldwide while the number of operators expanded by 138 percent.
In addition, 40 percent of flexible workspace demand is estimated to come from large and corporate companies and 14 percent of employees at large companies use coworking spaces.
Cutting through coworking in Africa
The African continent witnessed something of a rapid proliferation of tech hubs and coworking spaces in the last decade with over 80 percent of them springing up in the last 5 years.
Fast rewind to 2013 when the coworking scene in Africa was barely visible, there were only 24 spaces at the time. Two years after, there were over 250 active spaces in Africa, comprising both hubs and coworking spaces.
At the time, Egypt led the way with around 76 spaces, followed by South Africa with 67, with more than half of those spaces in Cape Town. Morocco was in third place with 17, followed by Nigeria with 13 and Kenya with 12. A separate World Bank report from 2015 identified 120 tech hubs and coworking spaces in Africa.
In 2016, GSMA’s research suggested that the number of coworking spaces and tech hubs in Africa had risen to 314.
According to 2019 data, Africa’s tech hubs have grown to 643 across the continent, with some 39 percent of them offering coworking spaces.
This would place the actual number of coworking spaces (exclusively) at around 250, with Nigeria, South Africa, Egypt, and Kenya leading in that specific order. However, there are claims that there are currently over 100 coworking spaces in South Africa alone.
Just for the sake of information, Nigeria’s Co-creation Hub (CcHUB) scored a first last year when it acquired Kenya’s iHub to become the largest space of its kind in Africa. It’s a testament to how much the scene has evolved.
What’s behind the African boom?
The increased adoption of technology (the mobile economy, if you will), Africa’s youthful population, and the current unemployment situation in the continent, are some of the factors thought to be fuelling the recent massive emergence of tech hubs and coworking spaces across the continent.
Africa has the youngest global population with 200 million people aged between 15 to 24. A recent report by the African Development Bank (AfDB) suggests that the continent’s working population will increase from 705 million in 2018 to nearly 1 billion by 2030.
On the one hand, a great number of people are ripe for the workforce. On the other, the unemployment problem is worsening especially in urban centres, just as the many other socio-economic deficiencies remain.
These problems have, sort of, created the need for entrepreneurship driven by innovation and technology. Ergo, the proliferation of tech startups, which find launchpads in coworking spaces.
With the growing need for flexible, affordable, readily available, and convenient workspaces for entrepreneurs, shared workspaces have been popping up everywhere. But now a global pandemic is threatening to tank the business model.
Will Africa’s coworking spaces survive?
On March 20, just as COVID-19 cases started to spike in Africa, Co-creation Hub announced its decision to suspend activities in its coworking spaces and hubs until further notice.
Two days later, LeadSpace also announced that its hubs will be closed for coworking as a due to the novel coronavirus.
Since then, several other coworking spaces in various African countries have also ceased operations and are encouraging their hub community members to consider working from home. Across the globe, it’s pretty much the same case of the shared spaces business grinding to a halt since tenants are no longer paying.
Modupe Odunyemi, the founder of CapitalSquare Workspace Solutions Ltd., a Lagos-based coworking space, told WeeTracker that income has dried up.
“Like most other businesses in Lagos, our coworking space is closed for the meantime. Because our business is tied to our space, it means there hasn’t been any income this month. We’re using this time to figure out how best we can continue to support our members and see how we can remain sustainable in the long run,” she said.
As Sahi of Pam Golding Properties Kenya told us, coworking spaces would need to adjust deftly and implement certain measures to keep the things going in these times.
“I believe that co-working spaces need to adjust and implement impressive measures to continue business and the business may take a positive turn,” she said.
“The working norm is quickly switching to a new set of rules, such as working from home, this may reduce the requirement for some business who may re-assess the value of investing in office spaces.”
Indeed, a number of office-sharing companies are starting to mix things up. Schuyler Vorster, whose business, Ideas Cartel, offers shared workspaces, boutique hotels, and club membership to entrepreneurs, has made some adjustments.
In a statement seen by WeeTracker, South Africa’s Ideas Cartel said it has recognised that creating spaces goes beyond just four walls.
So, it has created something called “Cartel Connect Online” — a digital platform that allows members to maintain engagement, encourage community building, share perspectives, and connect with a community of like-minded entrepreneurs.
Interestingly, the platform is also launching a food delivery business to cater to the needs of the times and, by extension, stay in business. And such adaptive measures could be the key to survival.
“I believe survival will only be dependent on the business’s ability to adapt to the new environment, therefore, surviving, and thereafter thriving,” Sahi emphasized.
For Janine Basel of Akro Holdings, which offers coworking spaces in South Africa, pivoting is now a necessity and no longer just an option.
“I don’t think coworking spaces will keep their market share and they will have to pivot. I think more people may be wanting to work from home and will see it as a viable long-term option. I think digital networking events will take the place of physical connecting,” she told us.
“We already started to pivot our offering to “Slow Lounge in the City” for people visiting an area and needing temporary office space for meetings or to work from.”.
On her part, Odunyemi told us that in hindsight, and going forward, the focus will be on providing more support for members outside of space and physical resources. She also hinted at doing more to build the community and actively contributing to members’ growth and success.
The fate of coworking spaces post-COVID-19
Office-sharing businesses certainly face some hard months ahead as the world navigates the great unknown.
Will people choose to not work in shared spaces? Yes. Will people suspend or cancel their membership and offices? Probably. Is this a recession? Quite likely. But will this spell the end of coworking? Absolutely not.
As Odunyemi emphasized, “I don’t think coworking spaces will lose their market share, but the demographics of coworking space users will probably change.”
“People (especially freelancers and solo entrepreneurs) will get comfortable with working from home and will think twice before investing in a coworking space. However, I do see business address and meeting room plans getting more patronage, as people would appreciate the flexibility.”
Due to COVID-19, the world has figured work can actually be done remotely. But the world will also figure out that, in the long-term, this is not a sustainable solution.
Humans are fundamentally social animals and people need, deserve, and crave community. The world simply can’t have that work-in-isolation option, alone.
People need options. Working from home can be one, and working from an office could be one, but the smart money is on remote workers choosing coworking, ultimately.
In addition, corporations will not be looking to purchase assets during the cash crunch that is already upon us, they will be looking for the flexible solutions their employees are demanding.
“As larger organisations scale down their operations, I expect some of them to consider coworking spaces as a viable alternative to standard office space rentals. There will also be greater adoption of remote working after this pandemic, which will encourage office workers to work from nearby coworking spaces if their homes aren’t conducive,” said Odunyemi.
To survive, it would be of benefit to coworking spaces to adjust the business model and continue their pivot toward attracting larger, more established businesses.
If economic uncertainty affects hiring and growth plans, established companies might be looking to use shared office space to lower real estate costs, and this could give coworking a leg up.
More so, as a lesson learned from this pandemic, companies would be looking to set up a more distributed workforce, as they won’t want to have all their employees in one building or location.
Coworking earns points here too. It’s one way to ensure that business and employees can survive the next global health crisis. And history suggests there will be a next one.
From a more sentimental perspective, people are losing their minds working from home. As the world seems to be discovering, working-from-home sounds like a great idea until it is the only option. People do want to work from home, just not permanently.
On a final note, coworking scores yet more point when it comes to work-life balance. According to one survey, 84 percent of coworkers feel more engaged and motivated than they did when working from home or a traditional office.
In another survey, 70 percent of people reported feeling healthier after switching to a shared workspace. A further 60 percent said they feel more relaxed outside of work since joining a coworking space. So, maybe coworking will not only survive the storm but also thrive.
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