Five ways co-working spaces can work for all companies
The co-working space landscape is growing by leaps and bounds. While a good portion of people opting for a co-working space service agreement tend to be startups and small businesses, enterprises are increasingly turning to the model for a variety of additional reasons, says Wayne Berger, executive vice-president, Regus and Spaces Canada — not the least of which is upwards of 25 per cent in cost savings versus conventional leases.
An added driver for enterprises in the future is the anticipated International Financial Reporting Standards (IFRS) new leasing standard, which will take effect in 2019.
“This will significantly impact the way leases are captured on balance sheets, as it requires public companies to list office leases as liabilities,” he says. “This will affect EBIDTA and profit. Service agreements, however, will be exempt. Transitioning from a traditional lease to a service agreement, therefore, would have very little impact on a balance sheet, while reducing capital costs.”
As the landscape matures, Berger says enterprise operations have increasingly created ways to turn to co-working space agreements. Following are some key examples:
1. New market entry
One of the biggest reasons larger companies leverage co-workspaces is for quick market entry, he says. “Amazon and Uber, for example, have been using co-working spaces as a means to enter a new city or country. They can set up operations within a new market in as little as 24 hours, and then use that as a foundation to build.”
2. Flexibility to match the pace of change
A growing number of enterprises use co-working spaces to have flexibility in keeping up with the rapid pace of change, Berger notes. “In 1920 the average lifespan of a company was 70 years. In 2010 the lifespan was forecast to be 15 years. Traditional lease obligations would match that life cycle. But within that time, things change and shift so much.”
While companies such as Juniper Networks and Verizon are maintaining corporate headquarters, they are beginning to shift to co-workspace facilities in lieu of traditional regional offices, he explains. “It adds flexibility because the model can be adjusted up or down, and eliminate costly leasehold agreements.”
3. Eliminating capital costs
Berger cites the example of Yell, a U.K.-based company that set a goal to eliminate all capital costs. “Their goal was to have a 100-percent flexible workforce. All costs associated with leases or building out a furnished working environment plus overall management is eliminated with a service model.” In fact, Berger estimates that a co-working facility arrangement could easily save a large organization $100,000 versus traditional lease obligations over five years.
4. Increased productivity for a mobilized workforce
Organizations such as Adobe often use co-working and shared workspace to increase productiv- ity for teams on the move, Berger says. “They can offer teams access to a large number of workspaces in multiple locations. This increases the amount of time people can spend with suppliers and clients and drive better efficiency.”
Attracting and retaining talent is also a factor. “Today 54 per cent of employees will spend half of their work week outside traditional headquarters and have no desire to commute,” he adds. “Governments and large organizations that want to attract top talent realize that they need to offer multiple workplace options in order to get jobs done quickly.”
5. Removing the bureaucracy that slows innovation
A large number of enterprises, from technology to financial services, are establishing innovation teams. “Companies are pulling those people out of the organization and into co-working spaces. This allows innovators to step away from the bureaucracy of a traditional corporate environment, as well as have the opportunity to innovate with other companies. It’s also a great option for project teams working within a limited time frame.”
The enterprise shift to co-working space options is indicative of an overarching global trend, Berger argues. “The economy is shifting from owning for a long period of time to consuming only what is needed. In recent months I have seen companies whose first choice is co-working space, and are not even considering a lease at all. It’s becoming a very powerful ecosystem.”