What’s Work­ing For Cowork­ing?

Forbes Middle East - - CONTENTS - By An­drew Love

A sim­ple business model of leas­ing large, cov­eted of­fice space on a shared ba­sis; a peak val­u­a­tion of $47 bil­lion; a mis­sion to “to el­e­vate the world’s con­scious­ness”: these fac­tors seemed to be the ideal in­gre­di­ents for WeWork’s suc­cess. But, one look at its fil­ing as part of its ini­tial pub­lic of­fer­ing process re­vealed mount­ing losses and an am­bigu­ous cor­po­rate struc­ture; fac­tors that low­ered the com­pany’s val­u­a­tion by more than half, and de­railed its plans to go pub­lic. This came im­me­di­ately af­ter the com­pany’s CEO stepped down, amid ris­ing pres­sure from in­vestors and the board.

But WeWork’s cur­rent set­back can­not be deemed as a blow to the grow­ing cowork­ing in­dus­try. With mul­ti­ple lo­ca­tions in over 120 cities, Abu Dhabi is WeWork’s only lo­ca­tion in the GCC with a sin­gle build­ing, and Dubai’s first lo­ca­tion is ex­pected to fol­low. In com­par­i­son, coun­tries such as Sin­ga­pore and Hong Kong, which are of­ten com­pared in terms of the business en­vi­ron­ment to Dubai, have at least 10 WeWork build­ings each.

More than half of the U.A.E.’s em­ploy­ees work re­motely ev­ery week, ac­cord­ing to a 2018 study by the In­ter­na­tional Work­place Group. With in­creas­ing gov­ern­ment en­cour­age­ment for small and medium en­ter­prises, and ef­forts un­der­way to be­come a dig­i­tal econ­omy, there is tremen­dous po­ten­tial for the cowork­ing and shared of­fice sec­tor—and it’s still wait­ing to be tapped.

So, what ex­actly is work­ing for cowork­ing?

With real es­tate both scarce and ex­pen­sive in cen­tral business dis­tricts, many new and emerg­ing star­tups are bur­dened by un­sus­tain­able cap­i­tal re­quire­ments and op­er­at­ing costs, shrink­ing their chances of find­ing the ideal of­fice space. Prop­erty own­ers also find it dif­fi­cult to find a sin­gle ten­ant for longer terms for their prop­er­ties. In such a sit­u­a­tion, the con­cept of pro­vid­ing of­fice space as a service pro­motes flex­i­bil­ity and af­ford­abil­ity to busi­nesses, sup­port­ing them in their frag­ile yet cru­cial phase of growth. At the same time, prop­erty own­ers are able to avoid long pe­ri­ods of va­cancy by en­gag­ing short or long-term ten­ants, depend­ing on re­quire­ment and avail­abil­ity.

Ride hail­ing apps like Uber, short­term prop­erty rental plat­forms like Airbnb, and food de­liv­ery ser­vices like De­liv­eroo, are all ex­am­ples of dis­rup­tors who make up the “gig” econ­omy. Today, an in­creas­ing num­ber of in­di­vid­u­als are choos­ing to op­er­ate on a free­lance ba­sis. For com­pa­nies, this might mean not opt­ing for per­ma­nent em­ploy­ees, and there­fore, no per­pet­ual need for space. But, for free­lancers this means hav­ing to find a space to op­er­ate, where they can meet and col­lab­o­rate with like-minded in­di­vid­u­als. By of­fer­ing of­fice space on a daily or monthly rental ba­sis, co-work­ing com­pa­nies can ef­fec­tively cater to this tran­sient de­mand from in­di­vid­u­als and com­pa­nies who need a tem­po­rary place to work, but do not wish to make an in­vest­ment. With tech­nol­ogy at the heart of this global dig­i­tal trans­for­ma­tion, co-work­ing space providers also of­fer ro­bust IT so­lu­tions that en­sure quick and un­in­ter­rupted con­nec­tiv­ity.

A large por­tion of the work­place pop­u­la­tion today com­prises mil­len­ni­als and Gen Z. These gen­er­a­tions place sig­nif­i­cant im­por­tance on col­lab­o­ra­tive ways of work­ing, where ideas are freely ex­changed with peo­ple from dif­fer­ent fields and cul­tures. Ex­ud­ing a ca­sual and fun vibe, we now see more work­places in­cor­po­rat­ing open for­mats and “hot desks” where com­mu­ni­ca­tion is or­ganic and highly en­cour­aged.

There is no ques­tion that there is de­mand for this type of work­place of­fer­ing, which is ev­i­dent from the early suc­cess of com­pa­nies like WeWork. Their tech­style brand, funky fit outs, and perks like yoga classes and bev­er­ages on tap are cer­tainly ap­peal­ing not only to the gig econ­omy but also to large tech cor­po­rates such as IBM and Mi­crosoft who have taken space. The chal­lenge there­fore re­mains to con­vince in­vestors that the neg­a­tive prof­its of such “uni­corns” are due to ag­gres­sive ex­pan­sion, but like oth­ers who have proven be­fore them, namely Ama­zon, there is solid business po­ten­tial there.

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