Prior to the pandemic, the world watched as flexible office space provider WeWork plummeted in value. Extravagance and mismanagement led to a tremendous devaluation of the company requiring extensive restructuring. Then, Knotel, a flexible headquarters provider and startup unicorn, filed bankruptcy in the midst of the pandemic. While COVID didn’t help, it had repeated many of the same missteps that WeWork had done. All of this has left many investors wondering whether shared workspaces are workable model. As the world emerges from the pandemic, this is an important question worth considering.
When it comes to flexible office spaces, there are several different drivers that enable such a model to thrive. Prior to the pandemic, a need for mobility and social connections served as motivations for shared workspace. After the pandemic, an escape from working at home became another. (Read more about how working from home will replace the smart city concept in this Bold story.) And with many offices and universities closed, many needed functioning spaces to work or study respectively. All of this has provided opportunities to understand the shared workspace market a little better. These are lessons investors need to appreciate when examining just how viable a flexible office space provider is.
“Right now, we are in the largest work from home experiment. I think we’re about to shift to the largest return to work experiment ever.” – Prabhdeep Singh, Global Head of Marketplace, WeWork
Changing Marketing Strategies
For all shared workspace companies, there is a constant choice that must be made regarding marketing targets. This even pertains to shared office and retail space. In simple terms, companies can choose to either focus on retaining existing clients or pursuing new ones. In terms of costs, recruitment of new clients is more expensive. Therefore, there is a natural tendency to focus on retention. But for flexible office space providers, this may have proven detrimental during the pandemic. With many offices closed, the potential number of new clients skyrocketed. Thus, failing to adapt to this aspect of the market might have reflected a major missed opportunity.
Another aspect of this changing market involved the distinctions between small and medium sized businesses (SMBs) and larger enterprises. Prior to the pandemic, SMBs accounted for the vast majority of clients for shared workspace environments. But with the pandemic, this changed. SMBs had to cut costs, and shared workspace expenses were among some of the first to go. In contrast, corporate executives who lacked an office building sought out flexible office space to meet their needs. Similarly, universities that closed their campuses and libraries did as well to accommodate students. Here again, being able to adapt and target the right aspects of the market were essential for viability.
“What we’ve essentially done is unbundle our space. It used to be that the only way to enjoy our spaces was via a bundled subscription product and monthly memberships. But we realized with COVID, the world was shifting, and to open up our platform to a broader group of people and make it as flexible as humanly possible.” – Prabhdeep Singh
Flexibility in Shared Workspace Packages
When WeWork grew exponentially during its early years, it did so by offering a subscription-based model. Monthly or annual packages were provided to flexible office space users that included specific amenities. For a period of time, this model worked well for WeWork. It also worked well for other shared workspace providers. But once the pandemic hit, few were willing to commit to such long-term agreements. This not only pertained to existing clients but to new recruits as well. Therefore, these providers had to adapt and extend the types of shared workspace options available in order to remain relevant.
For WeWork, they began offering on-demand use and all-access options to their menu. On-demand meant that someone could pay only for the time they wanted on-the-fly without any lasting commitment. All access offerings enabled executives and students to visit any shared workspace beyond a single locale. By doing this, WeWork saw their on-demand reservations grow by 65 percent and revenues by 70 percent. And they also gained new corporate and university clients they would not have otherwise enjoyed. For the time being, it made since to abandon membership plans to allow greater consumer options.
“As a flexible space provider, we are looking at where the world is going. And while we’re a small part of the whole commercial office space industry, we are working to use technology to enable a flexible workspace experience via a great app and the digitization of our spaces.” – Prabhdeep Singh
Reconsidering Flexible Office Space Amenities
As lockdowns and quarantines began, it’s well appreciated that videoconferencing sites became widely popular. (Read more about the innovation and growth of videoconferencing platforms in this Bold story.) For some flexible office space providers, they learned from this and began offering digital and virtual services. In essence, some shared workspace businesses allowed users to connect to on-site services remotely. This made such spaces more attractive when compared to others, especially at the height of the pandemic. Just as online retail and food delivery became increasingly attractive, so did these types of remote office amenities.
Companies like WeWork are now taking this concept and expanding it further. In essence, they have begun experimenting with a “business in a box” package for SMBs and startups. Services might include health insurance, human resource help, payroll services, and other insurance policy access. Smaller companies may be unable to develop such services in-house due to cost and time constraints. By having these amenities in a flexible office space package, however, they’re more likely to consider a shared workspace solution.
Being Dynamic, Adaptable, and Current Is Essential
Each of the above areas demonstrate the importance of adaptability when it comes to shared workspace offerings. Flexible office space providers must be able to quickly assess the market and change their strategies in order to survive. As WeWork’s and Knotel’s struggles have shown, it’s not as easy as it first appears. And mix in a pandemic with major shifts in the workspace landscape, things become that much more complicated. How all of this evolves as the dust settles remains unclear. But in all likelihood, things will continue to change more than they’ll stay the same.
The world is getting back to business. Are you ready to join it? Get the acclaimed book that can help you live Bold!