“Now is the time,” UK Prime Minister David Cameron declared in 2011, encouraging entrepreneurs and self-starters to build their own businesses.
Since then, Start-Up Britain has significantly grown, as more and more people went solo in response to a slow economy. According to the Professional Contractors Group, there are now 1.4 million freelancers across all sectors, up 14 per cent in the last decade. The shift is not just in the UK: in the US, there are 53 million freelancers, according to the Freelancers Union, accounting for 34 per cent of the national workforce.
Commercial property has struggled to keep up, with these new, digital-age workers requiring office space that is more flexible and affordable. As social media has fostered a generation of people who are keen to connect and collaborate, coworking offices has risen as a solution, allowing people to rent space on a short-term basis within a communal environment.
In London, companies such as TechHub have popped up across the city, while New York has seen success stories such as WeWork and Bar Works. Coworking space has become a more mainstream commercial property asset, disrupting the office market in the way that sharing economy stars Uber and Airbnb have disrupted the transport and travel world.
Is this the future for offices, or just a temporary craze?
Research by Harvard Business Review suggests there are genuine benefits to working in such environments, finding that people who belong to coworking spaces report levels of thriving of six on their seven-point scale – at least one point higher than those who work in regular offices.
Deskmag’s second Global Coworking Survey similarly found that people working in these shared spaces are more productive, confident and creative, with 62 per cent saying their measure of working had improved significantly as a result.
There are some risks for workers, however, as the flexible framework could give rise to disorganised habits and sharing ideas with others could turn working into talking.
Investors, though, have already begun to embrace the new trend too.
“This new asset class has now become one of the most attractive investment sectors in international property markets, particularly as supply of coworking space is so heavily outstripped by demand,” Roxanne James, Senior Analyst at United Property Invest, formerly of Merrill Lynch, tells TheMoveChannel.com.
United Property Invest is the global lead agent for Bar Works, a New York-based coworking space provider. Founded in 2015, it has already launched two coworking properties, one on Manhattan’s 39th Street and one in Time Square.
How effective are coworking spaces are generating income, exactly? With workers dropping in and out throughout the year, it is perhaps no surprise that according to Deskmag’s survey, 40 per cent of coworking spaces are profitable. Indeed, many of the early coworking spaces evolved as a collaborative effort for the communal benefits, rather than profits.
There are complex factors at play, however, with a deceptively diverse range of opportunities for income. 10 per cent of a typical space’s revenue comes from renting out meeting rooms or event spaces, for example, while food and beverages can generate 5 per cent of revenue. Workshops and other similar events can drum up 5 per cent through ticket sales.
With the freelancer population growing, the longer-term picture reveals a more sustainable model, with Deskmag’s research finding that 72 per cent of coworking spaces become profitable after just two years in operation. For privately run spaces, that figure is even higher.
Confidence certainly appears high among investors. In 2014, WeWork was valued at $5 billion, following a strong round of funding. In 2015, that doubled to $10 billion. Two months ago, the company’s valuation soared to $16 billion, reports the WSJ.
Bar Works is a open platform for individual investors, rather than institutional backing, but United Property has seen similarly strong response, with its first two locations already fully-subscribed. Its third premises, in New York’s trendy West Village, is now looking for investors. Each one operates on the same principle: rent office space in large volumes, then split it up and let it out month-by-month.
With around 4.3 million freelancers living locally, New York City is arguably the epicentre of the coworking revolution.
“There’s an extensive pipeline of demand to be met,” says James.
“This is a robust market in an economic climate that’s riddled with uncertainty across the world. This asset class also provides a safe haven for capital with its business model having a built-in ability to withstand downturns. The freelance economy has gained traction in recent years as a direct result of the global recession and is now on a steep growth trajectory.”
There are already plans for the company’s further international expansion in the next five years, adds James.
Four years on from the launch of Start-Up Britain, now may be the time, indeed.
Bar Works offers returns of up to 16 per cent over 10 years, paid monthly. For more information, click here.