It feels like there’s a WeWork on every street nowadays. Take a walk through midtown Manhattan (please don’t actually) and it might even seem like there are more WeWorks than office buildings.
Co-working has permeated cities around the world at an astronomical rate. The rise has been so remarkable that even the headline-dominating SoftBank seems willing to bet the success of its colossal Vision Fund on the shift continuing, having poured billions into WeWork – including a recent $4.4 billion top-up that saw the co-working king’s valuation spike to $45 billion.
And there are no signs of the trend slowing down. With growing frequency, new startups are popping up across cities looking to turn under-utilized brick-and-mortar or commercial space into low-cost co-working options.
It’s a strategy spreading through every type of business from retail – where companies like Workbar have helped retailers offer up portions of their stores – to more niche verticals like parking lots – where companies like Campsyte are transforming empty lots into spaces for outdoor co-working and corporate off-sites. Restaurants and bars might even prove most popular for co-working, with startups like Spacious and KettleSpace turning restaurants that are closed during the day into private co-working space during their off-hours.
Before you know it, a startup will be strapping an Aeron chair to the top of a telephone pole and calling it “WirelessWorking”.
But is there a limit to how far co-working can go? Are all of the storefronts, restaurants and open spaces that line city streets going to be filled with MacBooks, cappuccinos and Moleskine notebooks? That might be too tall a task, even for the movement taking over skyscrapers.
So why is everyone trying to turn your favorite neighborhood dinner spot into a part-time WeWork in the first place? Co-working offers a particularly compelling use case for under-utilized space.
First, co-working falls under the same general commercial zoning categories as most independent businesses and very little additional infrastructure – outside of a few extra power outlets and some decent WiFi – is required to turn a space into an effective replacement for the often crowded and distracting coffee shops used by price-sensitive, lean, remote, or nomadic workers that make up a growing portion of the workforce.
Thus, businesses can list their space at little-to-no cost, without having to deal with structural layout changes that are more likely to arise when dealing with pop-up solutions or event rentals.
On the supply side, these co-working networks don’t have to purchase leases or make capital improvements to convert each space, and so they’re able to offer more square footage per member at a much lower rate than traditional co-working spaces. Spacious, for example, charges a monthly membership fee of $99-$129 dollars for access to its network of vetted restaurants, which is cheap compared to a WeWork desk, which can cost anywhere from $300-$800 per month in New York City.
Customers realize more affordable co-working alternatives, while tight-margin businesses facing increasing rents for under-utilized property are able to pool resources into a network and access a completely new revenue stream at very little cost. The value proposition is proving to be seriously convincing in initial cities – Spacious told the New York Times, that so many restaurants were applying to join the network on their own volition that only five percent of total applicants were ultimately getting accepted.
Basically, the business model here checks a lot of the boxes for successful marketplaces: Acquisition and transaction friction is low for both customers and suppliers, with both seeing real value that didn’t exist previously. Unit economics seem strong, and vetting on both sides of the market creates trust and community. Finally, there’s an observable network effect whereby suppliers benefit from higher occupancy as more customers join the network, while customers benefit from added flexibility as more locations join the network.