The shocking downturn of global co-working giant WeWork, once an icon, is a case on its own and not an indication of the future of the concept in South Africa.
In fact, the evolution of the corporate office market across the globe, but particularly in South Africa and Africa, is experiencing an increase in office space being taken up by co-working businesses.
Shared spaces were once seen as the domain of creatives, but now corporates facing shrinking budgets and looking for ways to do business without being tied into long leases are also moving in.
And landlords battling to let office space are welcoming co-working tenants.
David Seinker, chief executive and founder of the South African co-working company The Business Exchange (TBE), says WeWork’s downturn did not mean co-working was “a flash-in-the-pan phenomenon”.
“It certainly doesn’t end with WeWork. In fact, the business model has been around successfully for at least 30 years.”
Seinker believes WeWork stalled for two reasons: “Firstly, it made the critical mistake of positioning itself as a technology business rather than what they actually are - a property services business. Secondly, the company veered too far away from its core offering and invested time and money in industries not related to its core functions.”
Before it faltered WeWork had, in the past two years, seen huge growth with offices in 280 locations across 111 cities in 29 countries.
Younger workers are looking for the buzz of an open space that allows for interaction and creativity. Picture: Supplied
Co-working - while seen as a disruptor in the past decade - has, in fact, been going for three decades. Regus, the world’s largest provider of flexible workplaces, started in Belgium in 1989. It is now part of the IWG brand with a network of 3300 workspaces in more than 1000 cities across more than 110 countries.
Co-working spaces have grown exponentially in Africa’s major economies and recently IWG pioneered its franchising programme on the continent. The first franchise centres opened in Angola, with Guinea, Djibouti, Zimbabwe and Ethiopia set to follow.
So confident is IWG of the co-working concept that Mo Nanabhay, franchise development director of IWG Africa, says three in 10 buildings on every inner-city street around the world could offer a new franchise opportunity.
“We’ve seen great demand in Kenya, Morocco, Mauritius, South Africa and Ghana in a short period,” says Nanabhay. “With advances in technology and an increase in urbanisation, flexible workspace is a growing reality. Flexibility is, in fact, becoming one of the key factors in assessing new career opportunities, as well as being a crucial element for companies to attract new customers.”
Britta Dahms, marketing manager at Workshop17, says co-working means shorter leases, so a company does not have to lock itself into a five or 10-year lease.
“Another key benefit to corporates is that people in shared spaces can focus on business development and productivity without having to worry about office maintenance requirements such as furniture, equipment, Wi-Fi, cleaning and security.
“Corporates have also found that co-working offers an inspirational and diverse foundation to innovate and improve technology outside traditional corporate environments which are often hierarchical and uninspirational.”
Louis Fourie, director of Venture Workspace based in Cape Town, believes the flexibility of co-working is becoming more attractive to corporates, especially those testing markets in foreign countries.
“This option requires no capital outlay and you’re not tied into a long lease. Also, by employing a younger workforce, corporates need to be more adaptive in their offering. Younger workers are looking for the buzz of an open space that allows interaction and creativity to flow.”
In the next decade Fourie says large property owners and property management companies will turn to co-working to fill their buildings.
“We’ll start to see the back of old school corporations and HQs and, instead, the rise of remote working and satellite offices around the globe.”
Seinker believes there are several reasons for the shift to co-working spaces, the most significant being cost.
“A big corporate can save up to 70% of its lease cost by housing its staff in a flexible office environment.
“Corporates still want tailor-made fit-outs, upmarket furnishings, a full IT structure, their own meeting rooms and the prominent presence of their own brand.”
Seinker says having corporates operate from the same space as an SMME “creates an environment where smaller companies are able to engage with the bigger companies and potentially turn these corporates into clients”.
Another reason for the shift from long-term leases to co-working spaces lies in new financial reporting standards whereby companies will now have to disclose their full lease commitments as liabilities on their balance sheets.
“That has major consequences because it not only impacts a company’s balance sheet, but it is also a liability that may be seen negatively by many other parties such as the banks,” he says.