Coworking is defined as the use of an office or other working environment by people who are self-employed or working for different employers, typically to share equipment, ideas and knowledge. Businesses and individuals typically commit to flexible memberships rather than licences or short-term leases, in return for access to a workstation with a personal mailbox, storage and landline services, as well as meeting room hire, catering facilities and often a calendar of networking events, for a specified amount of time.
In the seven years since it was officially launched, the number using the model has grown to more than 100,000 and could rise to one million by 2018. The ‘coworking’ model was originally used as a way to manage property costs in London, but has become increasingly popular in the Northern Powerhouse, albeit, largely in the form of more traditional serviced offices, incubation centres or small office suites offered on inclusive ‘easy in/easy out’ licences.
However, this is all changing – coworking demand is on track and set to take over in 2017 and beyond. Although it is still early days, the number of micro businesses (the greatest users of coworking space) is increasing and now equates to 96% of all companies in the UK.
One operator to fully embrace the coworking ethos in the North is pay-per-minute work, meeting, social and event space concept Ziferblat, which is adding to its award-winning Edge Street facility in Manchester's Northern Quarter with the acquisition of 6,000 sq ft at MediaCityUK's the Tomorrow Building. Ziferblat charge 6-8p per minute depending on location (8p in Liverpool). It also charges by the hour for meeting rooms depending on size, from £30 to £550 per hour.
Elsewhere in Manchester, after experimenting with the concept at the old Granada Studios, Allied London realised that it is not just the micro business that would benefit and has invested in the 160,000 sq ft XYZ scheme. Designed with coworking and interaction at its core, this was created to disrupt the financial district of Manchester and has successfully done so, with demand far outstripping supply.
In the regions, Manchester seems on the tip of everyone’s tongue with new entrants Head Space and WeWork taking root. Others now have northern cities on their radar too.
A model is evolving. Coworking space should offer the promise of collaboration with a business community ideology that is supportive and inclusive. Privacy is not forgotten and can be a major issue as users could find themselves working alongside competitors. Hence some developers are introducing vetting procedures for space users.
Coworking is still very much an emerging form of asset class and changes are needed if it is to have the same impact on property as Starbucks and the rise of the coffee shop. One example of this is traditional leases which do not usually permit businesses to ‘share’ occupation of their premises with businesses outside their own corporate structures. Fundability is also an issue where institutional leases are required to determine viability.
Think identity, buzz, community and amenity – by adding these organically into a building, it will enhance its potential with minimal impact on a landlord’s lettable space. In order to remain current, competitive and meet the burgeoning demand, the property industry must acknowledge the importance of this growing trend and react quickly.
This article originally featured in Lambert Smith Hampton's Northern Powerhouse Office Market Report 2016/17 and was updated for CoStar News in March 2017 - to view the full report, please click here.