Co-working is not new, but it makes perfect sense in an era of increasing competition for offices, and one of the biggest benefits is the opportunity for well-established firms and new start-ups to share ideas, writes Lawrence Higgins.
New York’s Michelin-starred Public Restaurant is packed from 8.30am through to when its kitchens open at 5pm and diners come to sample its renowned “Impossible Burger”. Because during the day Public, like other NYC restaurants, has been commandeered by co-working organisation Spacious.
At the restaurants, entrepreneurs get access to convenient, well-connected space for $95 weekly. The restaurants themselves get income from rooms otherwise lying dormant, create a buzz in their empty establishments and – as members often stay on after work – gain customers.
Like Public, corporates around the world have discovered that co-working hubs are efficient in activating under-used space, with the ability to claw back if needed; it allows them to be among the entrepreneurs and start-ups that are the lifeblood of innovation and it provides customers.
JLL research estimates that 30% of office space will be in co-working format by 2030. The majority of such corporate space will be for internal use only, but many companies will offer external memberships. Karen Williamson, research director at JLL, says that while activating under-used space is significant in corporates establishing internal hubs, the key driver is tapping into the flexibility and efficiency of entrepreneurs and start-ups and keeping abreast of new ideas.
Dominic Bowles, co-founder at Impact Hub Candidate Cambridge, says: “It’s hard for corporates to achieve the benefits from co-working without involving external people. Co-working operates best when taking advantage of stimuli outside ‘the norm’.”
There is a perception that corporates inhibit creativity, so some operators are restricting corporate use of their hubs (or banning them altogether). This is pushing businesses to create their own hubs, but the image problem remains.
“There are cultural issues,” says Rory Young, Cushman & Wakefield: “Start-ups may not wish to be in among corporates.”
Suzanne Gill, partner at lawyers Wedlake Bell, says a solution may be to follow the food market, where corporate giants create artisan products under alternative branding. “Tea Pigs is an overpriced herbal teabag, but it’s actually connected with Tetley,” she says.
However, Alexi Marmot, director of designers ASA and co-author of the BCO co-working report warns: “There is no free lunch. If you are given space, you have fewer rights. So do young firms value freedom over investment?”
Young points out it works both ways, as while start-ups are brimming with great ideas they are not typically business minded and need the corporates to progress.
Businesses appreciate that the osmosis effect of having entrepreneurs around can galvanise them. Gill points to the buzz around the practice’s Victoria Street office since a hub took space and says that is why the likes of British Land and Derwent are looking to provide floors in their larger buildings for flexible spaces. “With their broad people mix, co-working spaces create energy around the offices. They also provide expansion/overflow space.”
One key barrier preventing internal co-working is that in areas of highest demand, rents are high and availability is low. The City of London’s TechX The City report found that while many businesses appreciated the benefits of internal co-working space, they were not prepared to subsidise businesses when they were paying rents of £70 per sq ft. Steven Harvey, associate at Cheffins, says that in Cambridge there is huge demand from start-ups for space in a city that leads the world in tech development, but scarce availability means businesses cannot help them.
But for the future there is expected be growth in corporates hosting co-workers. Young says that as corporations re-purpose their assets they will consider alternative uses and more and more will opt for co-working hubs.
Adrian Leavey, partner at law firm Trowers & Hamlins, which is actively looking to establish an internal hub (see below), says: “Co-working – it’s the new Uber of commercial buildings.”
Legal considerations
Opening up your offices to outsiders is not straightforward. Initially tenants require the landlord’s permission. However, Adrian Leavey at Trowers & Hamlins points out that as the head tenant the corporate gives the security to the landlord – so while there will be lease issues they are not insurmountable.
Suzanne Gill at Wedlake Bell warns that under the Landlord and Tenant Act 1954, co-workers need to be monitored so they do not drift into becoming legal tenants.
The issues of security, confidentiality and intellectual property rights are prominent in a mixed environment. Gill points to the case dramatised in the movie Social Network where the Winklevoss twins thought they had hired the Zuckerbergs to do work for them, but they went on and did their own thing – Facebook. “If an employee of firm X devises an app, then it’s owned by the employer. But if someone just working at those offices devises an app, then ownership is blurred.”
Tim Nye, partner at Trowers & Hamlins, says that internal co-workers should act under similar guidelines imposed by traditional hubs that have contract conditions concerning investment rights and privacy.
Banks and law firms are well placed to cope with privacy implications as they already work under these conditions. Gill says: “Some cases entail only specific teams accessing certain spaces; we impose firewalls and test protocols regularly.
“It’s perfectly feasible to let on a short-term basis – it won’t overtake your offices and it’s here to stay. A savvy corporation will make it work.”
Corporate case studies
Banks
Co-working is becoming the saviour of some bank branches and the instigator of new ones. Cheffins’ Steven Harvey says: “Co-working space is perfect for banks – by activating their underused space it keeps branches open and nurtures new clients.”
C&W’s Rory Young says banks want to embrace the fintech revolution and that co-working helps them become directly involved.
Banking initiatives
- Barclays, UK: The bank’s “Eagle Labs” operate in under-utilised branch and office spaces. Incubators provide mentoring and advice, targeting high-growth firms and entrepreneurs.
- BNP Paribas Fortis, Europe: CoStation, part of BNP’s “Fintech Accelerator Programme”, provides advice and financial services to the start-ups and entrepreneurs using the hub.
- Idea Bank, Poland: The bank has opened new branches specifically to house its “Idea Hubs”, offering free access to co-working space. Idea found “Hubbers” open twice as many bank accounts as regular branch visitors, and bring four times higher sales of Tax Care accounting subscriptions.
- RBS, UK: At its Edinburgh flagship branch, St Andrews Square, RBS employees work alongside start-ups in a co-working environment distinctly different from the corporate offices it sits within.
- National Australia Bank: “The Village”, Melbourne, provides a start-up hub and a lively venue for the bank’s staff and client meetings.
- NatWest, RBS and Ulster Bank, UK: With KPMG, the trio provide free workstations and advisory services at its network of “Entrepreneurial Spark Hubs”.
- Umpqua, USA: As well as chocolates, coffee and dog treats, branches offer meeting and seating spaces, which are home to small businesses.
Global perspective
All around the world, all sorts of companies are bringing co-workers into their offices.
Prime examples
- AT&T: The telecoms company has six co-working hubs across the globe, which focus on developing the latest innovations and services.
- Google Campus: An international network of spaces operated by Google for Entrepreneurs to assist the start-up community.
- North Western University, Illinois: The college wanted to facilitate collaboration between academics, students and entrepreneurs, so it turned an underused parking lot into “The Garage” incubator space.
- Oxford University: To get direct access to the entrepreneurs, Keble College has given space to start-up enabler Oxford Innovation.
- Staples: The office store has introduced WorkBar into some branches’ underused spaces, providing co-working hubs and a showcase for its products.
- Westfield: The fourth floor of the shopping centre giant’s San Francisco mall has become “Bespoke”, a 200-seater hub for online retail start-ups.
Occupiers doing it for themselves
Alan Baxter, senior director of the eponymously titled engineering firm Alan Baxter, is probably the grandaddy of corporate co-working. After completing its Farringdon HQ in 1979, the company filled excess space with lodgers. Baxter says: “The idea of shared workspace took root and it has worked well ever since.”
With numerous built-environment firms in situ, workers engage with fellow professionals and benefit from collaboration with a range of specialists. Angela Whitehead, senior administrator, says: “Ideas and knowledge are exchanged in the kitchens, courtyard or staircases. Many collaborative projects have beginnings in the shared workspace.”
In Cornwall, St Austell Printing Company could not find premises to expand into, so built its own. To subsidise the project and to diversify the business, the development included the 22,000 sq ft, St Austell Business Park, with a range of flexible office spaces. Recently, when a start-up expanded into larger space, the printers decided to open a co-working hub.
Beth Mayman, operations manager, says the experiment has been so successful that if more space became available they would expand the operation. As well as using vacant space, Mayman says the start-ups create a buzz, help with PR by raising profile of the building and are customers for their services.
Could co-workers turn into clients?
Adrian Leavey at Trowers & Hamlins has been tasked with drafting proposals for developing a WeWork-type hub in the firm’s under-used space, with the aim that the practice will benefit from the impact on its working environment.
The law firm will act as a passive investor. As well as space, start-ups will benefit from workshops, advice, introductions to potential investors and the ability to tap into its global offices.
As well as synergy, the lawyer hopes successful start-ups will become clients. Fellow partner Tim Nye points out there are no guarantees. “However, not gaining a client isn’t a risk – not having successful start-ups is.” Nye says the gamble is worthwhile as you may be working with the next FaceBook.
Leavey says the move is key to the firm attracting the best young talent and keeping ahead of latest innovation and workplace trends. “We need to adapt to suit the future generation of clients.”
