A popular alternative to traditional office space, co-working space providers have been competing with office owners for tenants for several years. Now, co-working operators face new competition of their own as hotel and multifamily operators enter the co-working market.
Many multifamily and hotel operators are using co-working spaces as an amenity to attract and retain new residents or hotel guests and raise brand awareness. Others are looking for a slice of the action by establishing in-house co-working facilities that charge a membership fee and are open to the general public.
A new workplace study by Switzerland-based office services provider International Workplace Group, the parent company of Regus, Spaces and HQ, found that 50 percent of full-time professionals globally work outside their offices at least 2.5 days a week. With 85 percent of the 15,000 survey participates reporting that a flexible work option boosted their company’s productivity, demand for co-working space is expected to increase, as more companies adopt a flexible work policy.
Seen as an experiential amenity for residents, the growth of co-working spaces at multifamily projects is exploding, says Elyse Linowes, founder and principal of Rockville, Md.-based Linowes Design Associates, Inc., an interior design firm that works with multifamily developers including UDR, Equity Residential, Northeastern Mutual Life Insurance Co. and JW Capital Partners.
“It is a ‘must have’ amenity for (luxury) apartment projects today,” she says, noting that co-working space and an “over-the-top” fitness facility are the top two amenities prospective tenants look for when choosing a new apartment unit. “These amenities have to be there to get foot traffic, whether or not people use them,” Linowes says. She adds that co-working space is replacing underutilized areas such as lobbies and business centers in renovated projects, but is part of the initial design component in new projects.
Similar to what co-working operators do in the office sector, Fort Worth, Texas-based Craftwork is focused on providing “space as a service” in the multifamily sector. The company provides apartment owners with additional income by leasing underutilized space for a specialty coffee bar and co-working space.
Craftwork creates a co-working environment with free access for apartment residents, but also offers social and dedicated office memberships to non-residents, which include access to conference and meeting rooms, free coffee and events. The key for Craftwork is integrating its specialty coffee shop with the co-working space in a way that creates a unique experience for residents, members and coffee customers, according to company executives.
While operator branding defines design at corporate co-working facilities, Linowes notes that there are no design limitations for co-working spaces inside multifamily projects. As a result, project designs may reflect a target demographic—for example, projects designed to attract young professionals may have a hipper, edgier feel.
These co-working spaces also provide seating configurations to meet various needs, including restaurant-style booths; media bars like the ones at Starbucks; and lounge areas with comfortable, casual seating.
“I’ve found that people want to be around other people when working, but not necessarily converse with them,” Linowes says, so her projects also provide glass-enclosed meeting rooms with four to six seats, which can be utilized by private workers or study groups.
Meanwhile, Craftwork raised $3 million in Series A funding last year to finance 15 coffee bar/multifamily co-working projects over the next three years in cities including Houston, Dallas, Austin and Denver, according to Craftwork President Trevor Hightower, who says that his company is currently working on its first project under the Craftwork brand, Flatiron Domain, a new Streetlights Residential multifamily project in North Austin’s multi-use community The Domain. Hightower formerly founded WorkFlourish, a Houston-based apartment co-working operator, which was acquired by Craftwork Coffee last year.
According to Craftwork Coffee founder and CEO Riley Klitz, the growing telecommute workforce has contributed to a national loneliness epidemic. Multifamily co-working spaces offer apartment building residents both a convenient workspace without the commute and a place to potentially network, collaborate and socialize with like-minded people, he says.
Because these spaces tend to be smaller than corporate co-working facilities and are used by the same people every day, “residents see and know most of the 40 to 50 people in the space,” Klitz adds, noting that this platform encourages people to form friendships and can help tenant retention for apartment operators.
In a similar move, hotel operators seeking a slice of the co-working market and something to set them apart from the competition are increasingly adding co-working spaces to their facilities, according to a recent JLL Trends & Insights report. The report notes that this could be a big opportunity for hospitality operators, as workplace flexibility becomes more commonplace and young professional freelancers and entrepreneurial nomads add to demand for co-working space in hotels internationally.
Hotels are uniquely positioned to succeed in this market, according to Geraldine Guichardo, JLL’s head of Americas hotels research. With expertise in providing quality services and amenities, the hospitality industry is a natural match for today’s office user, who has come to expect a good workplace experience, she says. Hotels offer a range of services that enhance user experience, including restaurants, bars, coffee bars, meeting spaces and multiple common lounge areas.
For example, the Virgin Commons Club, a paid membership co-working facility at the Virgin hotel in Chicago includes access to private meeting areas, wireless printing, and a lounge area with a bar, free drinks and a library.
Pioneers in hotel co-working, like New York City’s Ace Hotel, however, see a business case for offering free access to co-working space at their properties, whether or not the user is a hotel guest. “It’s a win-win for property owners and consumers,” Guichardo says, noting that it enhances brand awareness and increases foot traffic at hotel retail services.
Branded hotel chains are beginning to embrace this concept and are revamping hotel common areas to create working and lounging areas available for both hotel guests and the public at large. The Downtown Moxy by Marriott in New York City, for example, created an interactive common area called The Living Room that doubles as a co-working space and game room by day and transitions to a hangout and party spot at night. The Sheraton hotel reportedly is also putting a “productivity table” with outlets, USB ports and rentable drawers in more than 400 of its hotel lobbies.
While it is too early to know if a co-working amenity will have a positive impact on hotel occupancy or loyalty, Guichardo says “We’ve seen hotels that offer co-working space receive strong feedback from consumers.”