Few companies or employees are planning a total return to the office anytime soon – yet despite that, co-working spaces aren’t doomed. To find out why, we caught up with Andrew Lynch from Huckletree and Josh Wyatt from NeueHouse.
DANNY GIACOPELLI: I'm Daniel Giacopelli and this is the weekly podcast from Courier. It's fair to say that few companies, and even fewer employees are planning a total return to the office anytime soon. It's easy to think that the modern office and the co-working spaces among them are totally doomed, but that's a superficial reading of what's actually going on. Despite the really public fall from grace by a few major co-working and membership clubs, the sector, despite all the challenges, isn't dead.
If you do a Google News search right now for the word ‘co-working’, you'll see tons of stories of co-working companies gearing up to open. From a female-focused one to another for mental health professionals, you'll see trend pieces on why suburban spaces are the industry's future, and others about why this might be the moment for co-working spaces in shopping malls. People have a hunger to return to a shared workspace, and loads of operators will be there to meet the demand. They might shift their offerings or their models and projections, but they'll be there. This year, the sector is forecast to grow at half the rate of the previous two years, according to a study. But from 2021, it's expected to rebound and grow at 21% a year for the next few years.
Today, we'll talk with two co-working founders who have insight on where things are actually heading. First up, if you listened to the Courier Daily Podcast, where we caught up with founders in the middle of a pandemic, you'll remember Josh Wyatt. He's the CEO of NeueHouse, a private workspace for creative entrepreneurs with locations in New York and California. Back then, Josh had to close all of his locations and furlough the majority of his staff. So three and a half months later, what's changed?
JOSH WYATT: When we last spoke, which I think was mid-April, we had just furloughed roughly 95% of our staff, which consisted of about 235 people out of 250. At the time, it was absolutely the most emotional, gut-wrenching decision that I had ever made in my career. What we did after the dust settled – and it took a couple weeks to really get through the processes, both legally and emotionally – we were able to approach things from a more clear and focused perspective. We’re all trying to manage one crisis after the other. The way that we've approached it, and the way that I've approached it personally, has been to try to slow things down once you get through the immediate crisis, and the immediate panic, and to put some framework around what the future looks like. To that end, over the last two or three months, we've really focused on communicating effectively, weekly, daily, with employees, both active and furloughed, and really providing them a sense of clarity.
Back in March and April, when everyone was trying to figure out what the world looked like, there was a total lack of clarity. A lack of clarity over a consistently large amount of time starts to create confusion, concern and stress. We don't have the answers any better than anyone else. What we have been able to do quite well, as both a company and a leadership team, is to start to provide a sense of clarity through solid communications, and really delivering on the words that we say. Being transparent about not knowing everything, and then what we do know, even in a limited capacity, we try to follow up with sincere and dedicated action. That's the best we can do on a daily basis, and whatever we can control in terms of our destiny, we try to really action that with a sense of purpose and a sense of commitment.
DANNY: We've been talking with tons of businesses, particularly within hospitality communities, namely bars and restaurants, who have reopened and then, of course, there's been a surge in Covid cases and now they've had to close back down again. I know you run a couple of spaces in California that have opened up again, and then closed, right?
JOSH: Back in May, after getting through that first surge of Covid, despite being able to legally re-open, we decided not to. We decided to wait to see what would happen in June. We also felt that we needed more time to prepare all the houses with respect to the proper health and safety rules and regulations and design aspects, as well as operational training. We opened two to three weeks later than most businesses on 9 July. By that time, we had had the chance to enact these new health and safety initiatives, both from the physical capital side of things, and from the operational training side of things.
We were riding a high on 9 July. It was a very emotional week. It was great to see people back (people meaning both staff and members) inside of the NeueHouse in Madison Square in New York, the Bradbury building in downtown LA, and in Hollywood. Then low and behold, five days later, on 13 July, the governor of California, Gavin Newsom issued a statewide lockdown, which was similar in nature to the lockdown that they put in place in March and April. So we've had to now close. The feeling is emotional, it is one of frustration, but yet at the same time, there's a sense of obligation and duty to society to do the right thing and close.There's no question that you have to do it, given the surge.
What I would say today versus four months ago when we closed for the first time on 16 March, is that we are better prepared mentally, financially and emotionally this time around. That preparation and that experience has really come from sharpening and honing our skill set over the last four months. I personally have studied the leaders and businesses and countries that have gone through deeply challenging situations, specifically looking at wartime leaders, and at how presidents or generals or countries managed through this.
There's a lot of great lessons in history. There's actually a lot of bad lessons as well, in terms of how not to do it. I've tried to take inspiration from some of the leaders who have kept a cool head. A good example would be John F Kennedy being put in a really tough situation back during the Cold War; he was getting advice from a number of different people that, most likely was the wrong advice. But he was able to manage through that in a calm and prepared way, so that as his time in office progressed, he was able to provide a sense of clarity and confidence to not only his staff around him, but to the country. We're in no way anywhere close to that level of importance, we're just a small company, but I do think that what we do now and how we do it is night and day ahead of where we were four months ago. That's what I'm trying to work through with my staff and my team, and our members.
Today we are better at communicating with our members than we were four months ago. I think that transparency and that clarity of communication has built up a sense of confidence in what we're doing as a company and as a business.
DANNY: That was Josh Wyatt from NeueHouse. Next up, back in May we caught up with Gaby Hersham. She's the co-founder of Huckletree, a co-working company with spots in London, Manchester, Dublin and Oslo. This week, I caught up with Gaby's co-founder Andrew Lynch, to find out how they're actually shifting their business and product to meet the new reality. As Andrew tells it, it has everything to do with flexibility.
ANDREW LYNCH: Pre-Covid, it used to be that I'd want a 20-person studio, 15 now because I'm growing into it. Right now, if I have 15, there may be 10 in the next six months, and of those 10, two or three might be in every day. It might be a varying two or three, because I'm now implementing a 50% to 75% work-from-home policy.
With regards to 15- to 12-person teams, which in our view are incredibly healthy and will promote a massive amount of productivity, we're looking at how we fit into that. We want to make sure that the added value of having a centralised HQ, or a smaller studio for people that need to work from a specific workspace and not from home, far outweighs the expense. It's a strange area that we are operating in at the moment, because everyone is looking for huge amounts of flexibility, and because we've been relatively financially prudent, it means that we're able to deliver that. Whereas there are lots of operators that have bought in at the top over the last five years, so their cost base is fundamentally higher; they have a certain level of income that they need to derive from each debt, which makes it much much harder to be ultra productive.
DANNY: I suppose the flexibility also helps as a cushion for when things go bad again. If we go back into lockdown in a couple weeks or a couple of months, some people could flex down in terms of the hours they spend at the office. If you just had one membership for a company, people might just cut and run completely, right?
ANDREW: Yeah, exactly. We see WFH as part of a longer-term trend. I don't think it's just a lockdown or post-lockdown policy. A year ago, myself and Gaby looked into flexible working, and now it's a given. Even some of the bigger tech companies are saying they're gonna implement it. I think we're more worried about how that impacts culture, how that impacts the people that actually prefer working side by side with their peers, etc. We're definitely doubling down on this flexible model, but equally we're really doubling down on the fact that we're not just providing a service, we're effectively trying to rebuild an ecosystem. Over the medium to long term, we're trying to adapt to the flexible needs and requirements that our members now demand from us.
DANNY: That was the micro view, that was Huckletree; but what about the macro view? For the last couple of years, co-working has become really frothy and bubbly. Everywhere you look, there's another cafe renting out tables for 10 quid an hour to work at. Everywhere there is a co-working space, it's super-saturated. Will that increase, because more people are remote working? Or will that just cut out all of the less good ones, and so only the strong ones remain?
ANDREW: It's a good question. Co-working as a phrase has grown in its definition over the last couple of years. Back in 2014, what we considered a co-working space was small, highly personalised, mostly made up of early-stage startups, one- to three-person teams.
What it seems to have evolved into is, in essence, serviced offices. When WeWork came along it was purported to have disrupted the whole model. Outwardly, it was very community focused, startup focused, beers on tap, etc, etc, and now they're essentially 50%, 60%, 70% businesses from enterprise. WeWork's new CEO just came out over the last couple of weeks saying that their community staff are only glorified receptionists. Since starting out in 2008-9, they have grown so big, and while there's nothing wrong with that, it's a fundamentally different product to what we're trying to sell into the market.
What has happened, and what will continue to happen is that there will be a retrenching of the definition of a working space. We like to call it a workspace accelerator, somewhere where the key focus of the product is on acceleration. That's not saying we don't have enterprise members, we don't have bigger teams, but part of the mandate for bringing them in is that they will feed back into the community. So whether it's Accenture, or Butternut Box, the bigger they grow, the more they learn. What we want to do is re-inject that learning back into the early-stage businesses we house. That obviously differs hugely from a lot of the bigger service office operators, landlords who are now getting in on the action. They see that the real estate side of it is fundamentally changing and becoming more flexible.
So, where do I see the market? I see it definitely splitting. Last year, we launched our first sector- and team-focused space in Westminster Hall with our partners Public, which is entirely focused on govtech, ie, where government services interact with technology, how to empower a government to take a more technology based and digital look at how governments operate. That has been our jewel in the crown. People see that space and being a member of that space as far more than just being in desks and seats. I think we've been ahead of the curve in trying to really reposition the business and the business model into being more than just a service office play. Now, bigger landlords facing voids and vacancy are going to see what we've been looking at for quite some time, the huge amount of operational leverage that can be applied to service offices and large-scale studios. I definitely do see there being a divergence of product type, something we've been harping on about for quite a while.
DANNY: And that's it for this week. Make sure to check out our new Workshop podcast, which we launched just a few days ago. Each episode explores the nitty-gritty of one business topic, from finance to marketing to human resources, really digging into it so you could understand it, and hopefully apply it to your own business. You could head to the show notes of this show, for a link or just search for Courier Workshop. And, as always, if you've got any questions, comments or feedback about anything at all, you can reach me at [email protected]. I'm Daniel Giacopelli. The Courier Weekly is back again next week.