At the height of the pandemic, as his competitors disappeared around him, Peter Chee wondered if his Seattle co-working business, Thinkspace, would survive.
“It was brutal,” said Chee, who counted at least a half-dozen Seattle-area co-working spaces that closed their doors for good after COVID-19 left workers stranded in their homes.
Among the Seattle area’s co-working casualties were Impact Hall, Atlas Networks, The Riveter, Hing Hay Coworks, Ballard Labs and Office Nomads. More than 800 co-working spaces permanently closed their doors nationwide, according to Upsuite, a flexible office space provider.
“The pandemic could have easily crushed Thinkspace,” said Chee. But he kept the business alive with a combination of layoffs, federal aid, outsourcing and a well-timed deal with a fast-growing startup tenant.
As of this month, Thinkspace’s 20,000-square-foot facility in Seattle’s South Lake Union neighborhood was 100% occupied and its Redmond space was at 92% occupancy, Chee said.
That’s largely because the very same pandemic that gutted so many flexible workspace providers has become a boon to those that survived.
Just as the pandemic spurred demand for e-commerce, collaboration software and home food delivery apps, co-working spaces now appear to be on the verge of becoming another pandemic success story – a matter of being in the right place at the right time as the virus continues to reshape the way we live and work.
Employers are widely adopting so-called “hybrid” work models that require employees to be in the office only a few days each week with the option to work the balance remotely. Large corporations such as Microsoft and Google, in addition to smaller startups, are among the many companies switching to this strategy.
This trend is benefitting co-working spaces in two ways, industry insiders say.
First, during their days away from the office, workers are turning to co-working facilities as a refuge from the distractions of home and an escape from the isolation they felt during lockdowns.
Second, hybrid work is a new concept, and employers don’t know exactly how much space they’ll need. The uncertainty has thrown the commercial real estate market in a blender, and companies are expected to turn to co-working spaces as relatively inexpensive places for teams to gather on days when they meet face-to-face.
“There has never been a stronger moment for flexible office space,” WeWork vice president Robin Cardoso said in an email. “The past few years have fundamentally shifted the idea of the office, demanding an entirely new approach to how businesses think about their real estate footprint.”
Cardoso added: “Flexibility has been pushed to the forefront as companies rethink their workplace strategies and real estate footprint.”
WeWork closed its Ballard location in Seattle last year, then announced it would reopen the two-floor, 76,500-foot-space in April. The facility first opened in 2019.
WeWork’s consolidated physical occupancy worldwide increased to 67% in the first quarter, compared to 63% in the previous quarter.
TractionSpace, a 15,000-square-foot co-working facility across Market Street from City Hall in Tacoma, Wash., had been offering space in its building for discounts as high as 70% during lockdowns, said CEO and Partner Don Morrison.
But now nearly all of TractionSpace’s co-working offices bustle with workers during the day, said Morrison, a former Microsoft employee.
The company is considering expanding into more Tacoma-area locations and partnering with other co-working businesses to reach other markets, he said.
Morrison said employers are increasingly turning to flexible office space and shorter-term leases because they offer flexibility as office space needs change. Co-working spaces can be cheaper than setting up your own office space, especially in the short term, because they come furnished, are professionally managed and provide a baked-in community of workers.
The trend comes as rising inflation and a stumbling stock market may slow tech company hiring. Both Morrison and Chee said they expect a recession, if one were to fully emerge, would continue to work in favor of co-working spaces’ favor, largely because economic uncertainty will encourage them to snatch up office space bound by shorter leases and more flexible terms.
“You’re going to see this new sector emerging in flex space and commercial buildings that are short-term leases,” Morrison said. “The age of the 10- to 15-year lease is probably coming to an end.”
A study published Monday by Delighted, a subsidiary of Qualtrics, found that nearly 88% of 250 startup founders surveyed said they’re worried about their ability to raise cash in the current economic environment. Twelve percent said they expected to cut the size of their teams or pause hiring this year.
Chee, who founded Thinkspace in the midst of the 2008 financial crisis, said those entrepreneurs may be drawn to co-working spaces because “the founders need flexibility to grow and expand and possibly contract and not be tied down to long-term leases.”
Broderick Group, the Seattle commercial real estate agency, said in a report last month that the seismic change in where and how employees work have created so much uncertainty this year that “corporate real estate departments have been frozen.”
As of April, landlords were reporting that only about 30% of their office properties were occupied, according to the report.
“The age of the 10- to 15-year lease is probably coming to an end.”
“Corporate real estate departments are still struggling to understand how much office space they need going forward,” the report said.
What’s almost certain is that many employers expect to require less office space, even as their headcounts grow. Some are already in the process of downsizing their square footage, according to the report.
Even as those employers downsize, Amazon, Facebook and other tech giants have gone on real estate buying and leasing sprees in the Seattle area and beyond during the pandemic.
Amazon alone has committed to more than six million square feet of leased or owned space in Bellevue, a growing tech hub near Seattle, according to the Broderick Group report. That’s more than triple its current Bellevue footprint and enough space to accommodate more than 30,000 employees.
Nonetheless, analysts and co-working space owners say all of these factors are expected to favor co-working and “executive suite” spaces like those offered by WeWork and Thinkspace.
Even Amazon teams are using Thinkspace for six months at a time, said Chee, who recently founded a new aerospace manufacturing startup called Minim Zero.
Regardless of their company’s size, Chee said, what employees turning to co-working spaces are craving is connection with other workers.
“They can be in a startup environment that has great energy,” he said. “One or two short conversations with somebody inside the space who’s just crushing it and you get motivated. You’re like, ‘Wow, what this person pulled off is unbelievable, right?’ It’s like it makes you go back to your desk and sit down and say, ‘I want to go crush my thing too.’”
Editor’s note: This story was updated to reflect WeWork’s Q1 2022 earnings report.
