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Alone, Together? Co-Working Spaces and the COVID-19 Crisis

Fitted out with desks, wi-fi and free coffee, co-working spaces (CWS) arise from a lack of suitable alternative workspaces in firms and homes, while supposedly providing freelancers with a productivity-enhancing milieu in which to work. Often more explicitly tailored to supporting and incubating start-ups, CWS emerged in the mid-2000s in major global cities like San Francisco, New York and London, and began to spread geographically and grow in scope of what they offered throughout during the early 2010s.

This growth occurred for a number of reasons. Firms across advanced capitalist economies were shrinking their payrolls with direct employees and rapidly expanding subcontracting arrangements, boosting the number of self-employed workers and freelancers. Meanwhile, the rise of the digital and creative sectors bypassed traditional, large firm structures and promoted the proliferation of flexible project forms of organization that combined specialist individuals in small teams. These transformations precipitated the move away from the coupling of shared spaces and times of work.

The broader backdrop of the ascendance of the digital knowledge economy, both technologically and ideologically, promoted new ways of working such as non-routine work practices and mobile or ‘nomadic’ work patterns. New values of disruption and creativity and a fetishisation of innovative orientations to uncertain futures provided the organisational and rhetorical constructions that underpin the culture of co-working.

These organisational trends were augmented by the existence of surplus space in urban centres as large firms decreased in scale and some sectors shrank, e.g. newspapers and publishing, storage and warehouse space. In the UK and in a range of other advanced economies, public sector and local authority cutbacks over the same period and a contraction of some public sector functions created underutilised office capacity in urban areas. This opened up previously expensive, and newly lucrative, real estate to new users.

Other changes in urban property markets dovetailed with the growing availability of urban office spaces and uneven but rising interest from private investors. Especially in the epicentres of digital economies such as London, Los Angeles, Tokyo or Shanghai, costs of living (and in particular rents) skyrocketed in relation to average incomes. Just as demand kept growing for more flexible forms of working from employers and workers alike, an ever-lengthier list of urban areas saw increased numbers of people sharing housing without proper spaces to work at home. Flexible workers and freelancers sought out spaces beyond the home in which to work.

More than an office rental

Far more than mere office rentals for individual workers, coworking spaces also intended to become central sites for the articulation and accumulation of reserves of social capital for the expanding number of entrepreneurs and freelancers. Whether as a service on the private market or a form of support provided by the public sector, the promise of coworking spaces to their users consists in opportunities to find jobs and projects,  a  sense of ‘community’ around work recreated with care and effort, and the chance to build and expand networks and exchange knowledge with others.

These dynamics assume a more socially and politically committed edge in the community-led spaces that stepped in to fill the void left by the withdrawal of central and local government support in the long period of austerity following the 2008 financial crisis. In the UK as elsewhere, social enterprises and public sector initiatives set up CWS in areas of economic decline and low skills with the intention to provide technology, advice, training and networking activities that could link locally deprived populations into the world of work. Similarly, spaces like the Impact Hub in London pioneered a movement of socially committed spaces invested heavily in social innovation and social entrepreneurship.

Large-scale, corporate  coworking organizations such as WeWork have taken things to a whole other level, creating a controversial and gargantuan business model based on promoting its spaces as the forefront of an unfolding future of work that is productive, informal, fun and sociable. However, many of the claims on which the sector sells itself in these respects – particularly as regards to co-working’s positive impact on work, innovation and productivity – seem overblown, and some models of financing spaces – specifically that of WeWork – have been exposed as being too highly leveraged.

WeWork represents a special case with its bullish behaviour, dramatic rise and wobble, and possibly imminent fall. In reality, there is a diverse ecosystem of CWS from city to city, with a wide range of business models and organizational priorities. There is even some evidence that major hotel chains. gyms and ‘hybrid CWS’ are muscling in on the market, serving as ‘drop in’ spaces that could offer cut-price desks and discounted food & drink during off-peak business hours for their core businesses.

Co-working meets social distancing

At the time the COVID-19 pandemic hit, CWS were continuing to grow with aplomb, supported by various combinations of large real estate owners, private equity investors, international brands, local entrepreneurs, social enterprises, local governments and universities. But the domino of COVID-19 lockdown measures immediately left thousands of work stations devoid of users raising fundamental questions about the very idea of the CWS as a model. In the face of an abrupt shift to working from home for desk-based workers, including professionals and others, a wide variety of responses have emerged.

There are signs the financialized enterprises supporting these spaces will struggle to weather the lockdown. A central contradiction is that they are committed to long-term leases and investments but with revenues based on short-term contracts with multiple members. This means that there can be a massive shortfall if members no longer join or refuse to pay at the same levels as before. A source of potential uncertainty, therefore, is whether investors will be willing to bail them out in the current context.

WeWork is an extreme, but nonetheless interesting, example of these dynamics. In the wake of the pandemic, WeWork has sought to shore up some of its public profile by launching ‘WeWork for Good’, offering space and facilities to support organizations on the frontline of COVID-19 responses. In under two months its valuation had more than halved, its major investor was calling the decision “foolish”, and while the company asked for reprieve from the landlords it rents space from, it was refusing to extend the courtesy to its own client small businesses

Further down the food chain, many CWS have closed for the duration of the lockdown and hope to pick up again in the future. Many, but not all, have suspended membership fees in this period. Whilst many spaces are hosting webinars on topics like the challenges of homeworking, the formal and informal networking events on which many spaces set out their stall seem difficult in this context to say the least.  Other activities central to the experience and practice of co-working, and which purportedly make CWS worthwhile in the first place, simply do not translate into a realm divorced from physical space and its material affordances.

A small number of spaces have nonetheless remained open, adapting to social distancing regulations with an emphasis on hygiene and safe distancing. WeWork, for instance, has only closed a few sites because of COVID-19 though it is engaged in a substantial restructuring due to its ongoing financial problems. Reports indicate its open sites are barely being used and members are unilaterally breaking their contracts, piling further pressure on WeWork’s financial position.

Given that co-working is already associated with precarious forms of labour like crowdsourcing, and providing atomised workers with access to tacit knowledge and social interaction, the shutdown will likely have a significant affective impact on how co-working is experienced and sustained in an age of social distancing. This impact will be felt differently across urban and rural areas and across different forms of social and economic diversity and inequality. For instance, the added necessity of secure and stable broadband when homeworking, which is subject to persistent ‘digital divides’ in access and ability to use, will only deepen with the move away from co- to home-working. The demand for productivity will not let up, even as the new communities that have sprung up around the new ways of working are deprived of their co-working infrastructure, placing a risk to the mental health of displaced co-workers experiencing social distancing as social isolation.

In response to these dynamics, some spaces are attempting to create and sustain online communities to support co-workers stuck at home. A number of CWS are providing virtual services such as network events to justify fees and to keep in touch with members for when the lockdown winds down and users can begin to reenter spaces in an inevitability socially distanced fashion. There is an element of competition in the ramped-up efforts to create online communities during lockdown as a means of promoting spaces when the economy begins to reopen. Moreover, anticipating an increasingly fraught struggle for survival in the coming crisis, CWS have engaged in intensified competition to establish closer connections with local and regional government.

As well as the dynamics within the provision and organization of CWS, there is the wider question of the status of the self-employed and freelance workers that represent the vast proportion of their users. Work has dried up for these groups, rendering them dependent on government stimulus and support schemes ill-suited to the specificities of their legal and financial status. Unemployment is on the rise and by May 2020 more than half of the UK’s adult population was being supported by the state in some way. This precariousness has a knock-on impact on spaces as membership fees take a low priority during the lockdown and resulting downturn, depriving spaces of income to tide them over in the current crisis.

Co-working spaces and the coming crisis

The future for CWS is uncertain and at the mercy of the wider possibility of significant restructuring in how we work and do business in the wake of COVID-19. Many of the existing freelancers who had been using spaces may need time to rebuild their networks and may be less inclined to jump back into expensive membership deals.

Changes in the high street, shifts in the economy of urban rent and office space, small business closures and collapsing property prices (with councils playing a more pronounced role in planning and allocation), may combine to free up stock for CWS at low cost. At the same time, given the decline in economic activity and the lack of alternative tenants for the buildings they occupy, CWS may take the opportunity to pressurise their landlords to renegotiate leases, driving down prices.

As well as impacting upon the current composition of the co-working sector, the crisis may precipitate the rise of new entrants. Specifically, low interest rates and easier access to business loans may encourage new entries into the co-working sector especially if, when lockdown is released, it looks like there may be more demand for working outside traditional corporate office space.

The demand from corporate workers to work remotely may increase having shown that it is possible during the lockdown and especially where this helps avoid a commute in public transport. There already exists an increasing tendency for firms to locate individuals and groups of workers in CWS to encourage innovation and knowledge exchange. Small and Medium Enterprises will be taking a big hit from the pandemic and the crisis to come, and this may impact upon their capacity to co-locate workers in these kinds of spaces.

However, if organizations start to seek to cut costs in real estate and maintenance, the question will start to arise as to whether the workers dispersed outwards from fixed office space are going to be more productive if they move into coworking spaces rather than stay in their home environment.

Moreover, CWS may provide a more cost-effective solution in terms of quickly coming up with workspaces that abide by social distancing rules, as compared with corporate offices. In this sense, it is not implausible that CWS are able to survive the lockdown and could enjoy a boost in membership.

To encourage new custom and former users back into the fold we may also witness price wars ensue among existing spaces, with the capacity to compete reflecting variable levels of sunk investment in real estate. On the user end, this may have the effect of making space membership more affordable, but there will be a divergence between spaces that own their property and those that rent.

The focus and purpose of CWS may also change due to COVID-19. The already competing imperatives of exclusivity, productivity, community and wellbeing may come into greater conflict, with different spaces crafting new offers based on a fidelity to some principles above others.

There may become a more profound polarisation between luxury for some and necessity for others. In particular, we may see the emergence of new forms of CWS in the private sector such as boutiques prioritising social distancing and hygiene and ‘third spaces’ owned by large corporate brands offering their employees an alternative place to work away from both the office and their homes.

Meanwhile, social enterprises and local authorities may also be keen to rebuild communities and networks by rapidly opening and reopening spaces particularly in areas of deprivation and rural areas as a way to connect them to urban centres to which workers are unable to travel with the restrictions in place because of COVID-19.

The lockdown has appeared to have encouraged more community-focused thinking and a greater sense of civic belonging which holds the potential to feed into a resurgent re-envisioning of the co-working agenda. Affordable CWS on shuttered high streets could be a more appealing prospect to groups formerly excluded from the social and organizational culture spaces project. This may take new forms such as ‘pop-up’ or improvised temporary spaces focused on specific projects and events in specific locales.

The wider question remains, however, as to whether the whole paradigm of the CWS can sustain itself independently of the physical and spatial proximity on which their offering is based. As WeWork’s business model has proved, trying to operate as a platform firm whose core selling point is simply connecting people in huge urban spaces is not sustainable even aside from the impacts of the COVID-19 pandemic on economy and society.

The fallout of the pandemic and the crisis to come will affect the co-working sector unevenly, depending on a range of factors including business models, urban geographies, ownership structures, and the particular needs of the different users, that spaces cater for, as well as the companies and clients on whom they depend for work.

One thing is certain: the crisis will incubate new work cultures and further cultivate those already existing, whether good or bad. The normalisation of socially distant working practices may crush the nascent co-working sector or create new demands for the construction of communities around work that is increasingly atomised and individualised. Playing a vital role in providing an infrastructure for some of the most dynamic and innovative parts of the economy, it is important that policymakers at the local and national level pay close attention to the needs and fortunes of this foundational resource in the coming months.

 

The Co-Working Research Collective is a group of academic researchers investigating the dynamics of CWS and their role in the wider UK economy. Its members are:

  • Dr Ödül Bozkurt, University of Sussex Business School
  • Dr Greig Charnock, School of Social Sciences, University of Manchester
  • Dr Jennifer Johns, University of Bristol School of Management
  • Prof Glenn Morgan, University of Bristol School of Management
  • Dr Harry Pitts, University of Bristol School of Management
  • Dr Malu Villela Garcia, University of Bristol School of Management
  • Dr Edward Yates, School of Management, University of Sheffield

Image credit: LYCS Architecture on Unsplash