WeWork began attracting large companies to its desks in May of last year. Now, those companies represent its fastest-growing business.
Large companies increasingly value maintaining a number of coworking desks for added flexibility, networking opportunities, and, if for nothing else, to keep an eye on startups. From WeWork’s changing customer base to an increased focus on amenities, evolving trends in the marketplace position the office sector for another wave of disruption.
WeWork’s customer base is shifting
New data from Recode sheds light on just how quickly WeWork is reinventing itself. Today, companies with 1,000 or more employees, called enterprise companies by WeWork, make up 20% of WeWork’s membership base and account for 30% of the firm’s monthly revenue. WeWork increased the number of enterprise companies leasing space by 90% this July compared to July last year, and over the same period enterprise companies leased 360% more desks at WeWork. That means that, in addition to WeWork attracting more large companies to its offices, many of those companies have decided to take on more coworking space over the last year. Among those companies are global giants like Microsoft, IBM and Salesforce.
Although large businesses are playing an increasingly important role in the coworking space, that’s not how it started. According to a survey from Emergent Research, seven years ago almost 80% of all coworkers were freelancers. Today, freelancers only represent 39% of coworkers as large and small businesses consistently lease more space from coworking providers.
While freelancers will probably always play a role in coworking environments, it’s likely they will never again be the dominant group. By 2020 Emergent expects global coworking memberships to hit 3.8 million, more than double current levels, and experts predict many of those future memberships will come from big businesses.
Coworking offers big businesses a competitive edge
Once viewed exclusively as domain of freelancers and startups, large businesses are increasingly taking advantage of the unique benefits offered by coworking environments.
“For corporations, coworking can offer a competitive edge, allowing them to tap into new products and ideas that wouldn’t have been possible inside their own offices,” said JLL Director of EMEA Research Karen Williamson. Leasing a few desks at a popular coworking site gives established businesses the opportunity to work alongside and learn from innovative startups in their field. This proximity could help large companies stay on top of new trends in the industry, boost creativity and open a pool of potential clients.
Coworking offices also make it easier for large companies to expand business abroad. Rather than commit to a long-term lease in an uncertain market, companies looking to expand can simply lease a few desks at a local coworking provider for a short-term commitment and test the waters. In addition to flexibility, coworking gives established businesses the opportunity to network with local businesses. The combination of flexibility and access to local players often makes coworking arrangements the best choice for expanding businesses, especially when a company isn't sure how much space they will eventually want in the market.
Office markets are set for more disruption
Traditional office giants are not blind to coworking’s success and its growing corporate popularity. By 2030, JLL predicts investors will significantly reduce holdings in traditional office space and dedicate more capital to flexible space. Ultimately, JLL estimates that 30% of corporate real estate portfolios will be allocated to coworking holdings.
While WeWork is in the midst of boosting its corporate clients, there are already coworking providers, like Serendipity Labs, that heavily focus on enterprise companies. Serendipity Labs counts Amazon, Deloitte and PepsiCo among its clients, and large companies account for 45% of its member base.
Although office landlords are using various strategies to fight back against encroaching coworking providers, boosting amenities is a popular approach. That’s the idea behind Tishman Speyer's Zo amenity package, which the firm launched at Rockefeller Center earlier this year. While amenities are nothing new in commercial real estate, Zo goes further than most and offers services ranging from emergency childcare to delivering meals directly to employees’ desks. It’s too early to say whether this type of amenity package will effectively retain corporate clients, but it foreshadows concessions that may be common in future office markets.
Large companies will not entirely abandon traditional offices anytime soon, but many will keep turning to coworking providers like WeWork for various needs. Whether that’s for increased flexibility when expanding or to keep an eye on startups in the industry, big businesses are no longer strangers to coworking. On the contrary, they are the industry’s largest-growing business, and that dynamic sets the stage for another wave of disruption in the market.