There has been a lot of discussion of how the pandemic is shifting work permanently from a central gathering point (The Office) to a distributed environment (Work from Home). In this new paradigm, accelerated but not created by the pandemic, the office becomes secondary to a company’s culture. Or it goes away entirely.
The evidence of this shift is unmistakable and much of it was shared in the recent Localogy report, “Remote Work and the Local Commerce Ecosystem“.
A recent proof point is Google’s decision to extend its expected return to the office by a few months, into September 2021. And it will allow three days at work and two days at home (or wherever) going forward.
The Remote First Hall of Fame
Google’s choice is actually being conservative compared with other companies going harder at the WFH model post-COVID. For example, Shopify, Slack, and Twitter have given employees the option of working from home indefinitely. They are just a few of a long list of companies that are either going fully remote or remote optional. The fintech Stripe made an even more interesting decision and gave employees $20,000 to get the hell out of Dodge (or in this case San Francisco) to set up a remote work situation somewhere else.
Of course, there are skeptics like Netflix CEO Reed Hastings and Yext CEO Howard Lerman who think WFH “sucks” and can’t wait to bring the band back together at their nice offices.
The tension in the debate pivots around the benefits of in-person collaboration and relationship building vs. the cost-savings and productivity gained from a remote-work culture. Both sides have a point, and there is likely to be an ebb and flow between the two as we move forward. But it seems baked into the cake that remote work will be a much bigger part of our lives post-COVID than in the “before times.”
Is a Co-working Pass the New Gym Membership?
This leads us to co-working facilities, of which WeWork is the most well-known but not the only player.
We think this sector could have a real moment once the vaccine takes its full effect. Here is our reasoning.
Adult Supervision (Not) Required
Covid has laid bare that remote work (which has drawbacks that we’ll get into later) is not a productivity killer. Quite the opposite. And the idea that managers need to have their eyes on the team all day long has also been pretty well debunked.
Localogy’s own data supports this. Between April and June 2020, the percentage of small business operators who were “moderately” to “extremely” concerned about WFH productivity dropped from 60% in April to just 38% in June.
South African academic, digital strategist, and author Herman Singh put it well in a recent conversation.
“We have really reached the end of this concept of the big city center building where everybody works,” said Singh. His recent book “Di-Volution” is about the post-Corona digital economy. “There may be collaborative type businesses where this still works. But the idea of people just attending a place in order to be seen is gone.”
And the potential for cost savings, for employers and remote workers, is staggering. Eliminating or dramatically reducing the office footprint will save small and mid-sized businesses millions and large enterprises billions in annual cost. Of course, it will take years to phase out of leases, but the savings are already beginning to be felt.
So, What’s the Problem?
So workers are more productive (arguably) in a remote setting. And businesses stand to save gobs of money if the shift to remote work takes its full form. Then what are the drawbacks? Well, there are those second-order impacts on businesses. And, there are negative impacts on income inequality. But these are discussions for another day.
One major challenge for the knowledge-based companies that can, and largely will move to remote work is that some of the workers they really want to recruit don’t want to work remotely. And these workers are likely to skew younger. Imagine you are 28 years old and single, living in New York and working as a content strategist at a SaaS company. Would you like to hang out all day in the tiny Brooklyn apartment that you share with two other knowledge workers? Or would you rather go to a cool office to work with others in your age range, and then hang out for drinks after work?
Enter (or is it Re-enter?) Co-working
The evolving changes to the infrastructure of work will swirl into a perfect storm of opportunity for the co-working industry. Think about it.
Commercial space is beginning to hollow out, driving down the cost per square foot on quality office space. Remote-first companies are reaping piles of savings which, if they were wise, they will reinvest in their workforce. Some of it anyway. They can subsidize their workers’ WFH stack — chairs, microphones, and cameras, various WFH tech subscriptions, etc. But what about our 28-year-old content strategist in Brooklyn? The best perk you can offer them is a co-working membership. Even if it’s only for a once or twice a week hot desk pass. That would be a coveted perk.
Companies giving up millions of square feet of downtown office space can afford a lot of hot desk passes.
Of course, one risk is this trend will become widely recognized and we will soon find co-working space outstripping demand. But that’s for the free market to sort out.
It’s worth noting that we are not specifically predicting a resurgence of WeWork. Our prediction is more about the space than WeWork specifically. This after all is a company we’ve been critical of here during the pre-pandemic before times. And for good reason. Certainly, the pandemic itself has been brutal on co-working. But we do expect the post-panemic new normal will bring this sector a ray of hope.