What is Coworking and Why Should You Care?

Dominic Penaloza 

Chief Innovation Officer at naked 

Coworking is when people with different employers share a work environment and is typically membership-based. Coworking is so powerful because it enables each member to enjoy both the superior economics *and* superior user experience. In other words, coworking offers you a better office at a lower price. And who doesn’t want a better office at a lower price? 

Later in this post I will share some proprietary market data which supports my assertion of “better office at a lower price”. In addition to the nicer office argument, I will explain how coworking also offers a superior user experience by way of a social community that leads to new contacts, customers, and business partners.

If this value proposition of superior economics and superior user experience sounds familiar that’s because it is found in other industries within the sharing economy such as ride sharing services like Uber and Didi or home sharing services like Airbnb. Since almost everyone would choose better service at lower costs, these new sharing-driven models are rapidly gaining market share and disrupting massive traditional industries like ground transport, residential real estate and commercial real estate.

Let’s dispel a few myths while we’re talking about this topic. Coworking is still at a very early stage of market adoption and understanding, so it’s worthwhile to spend a paragraph on what coworking is NOT. Coworking isn’t incubating startups, although many coworking spaces offer incubation. Coworking isn’t focused on tech companies, although coworking has boomed alongside tech and the related trends of mobile workforce and the gig economy. And coworking isn’t only for small companies. Companies of varying sizes, including the Fortune 500, are now adopting coworking.

How does coworking deliver a better office at a lower cost? 

Here’s how it works. Imagine an office building housing 100 small and medium sized companies. In a traditional office this would mean 100 front desks, around 100 meeting rooms, 100 printers, 100 WIFI setups, 100 pantries and 100 water coolers. In a coworking office this would mean one front desk, around 4–6 meeting rooms plus several meeting spaces, a few printers and one WIFI setup. The cost savings come from needing less total real estate, fewer assets, and a much higher utilization of space. And that’s only accounting for the real estate and physical assets. Coworking also optimizes the 100 procurement processes for a total of 500–600 desks and chairs; now simplified to one procurement process for all the desks and chairs. 

Finally, the best part: design. Most companies don’t have world class interior design skills and most companies want to minimize renovation costs. Sharing world class design skill is an important aspect of coworking. The best coworking spaces offer innovative workspace design which fosters collaboration and creativity at a higher level of quality than any individual company would be able to do by themselves. Smart founders are beginning to realize that coworking enables them to offer many of the work environment perks seen at top talent magnets like Apple and Google. This is important because the #1 concern of company founders is hiring good people. Coworking levels the playing field between Google-type firms and the rest of us in terms of workspace designs, features and comforts.

This exciting opportunity to improve the way people work and innovate in the office real estate market and business social networking market is why I joined the naked Hub coworking network as Chief Innovation Officer and Chief Product Officer. One of the innovative things we’ve been doing is crowd-sourcing data on the total cost of offices in Shanghai. We built an office cost calculator that helps people figure out what it really costs them to operate their offices. We"ve included details that people often forget such as Internet access costs, depreciation of renovation and furniture investments, and cleaning services.

Based on the data input by users from the office cost calculator, we calculated that the monthly cost of an office in Shanghai is 200% more than a premium coworking private office membership fee and 335% more than a premium coworking hot desk membership fee!

Users can input their various item costs into the calculator and it will tell them their total office cost per person. On average, the total cost of an office is 6,026 RMB per month per person. That’s 200% more expensive than the typical naked Hub private office all-inclusive membership fee which is only priced at 3,000 RMB per month per person.

Regarding the "nicer office" benefit, naked Hub has won numerous design awards. Here are a few:

• Best Workspace, Best Meet Up, Best Stair, Best Lighting (Uban 2016 Best China Office Award)
  

• The 11 Best Coworking Spaces in Asia (Forbes Magazine)

• Best Innovative Space (Shanghai Home Décor Design Week)

• Top 10 Design Spaces in Shanghai (Design Week)

• Coolest Places to Work in Shanghai (Shanghai WOW)

So at least in Shanghai, naked Hub has proven that coworking really does deliver a nicer office at a lower cost compared to traditional offices. But wait, there’s more! Just like the hotpot photo at the top of this article, the nice office and lower cost are just the beef and the broth. There are other ingredients that help explain why coworking is booming at 71% compound annual growth rate from 2007–2015 and projected to grow at 68% CAGR 2016–2018.

Here are the other spices in the coworking recipe.

So why should you care? Well, big picture, as coworking grows to take an ever-larger share of the office space market, all of that sharing ultimately means less waste of precious real estate and resources. Think back to the 100 companies and 100 meeting rooms. Coworking is a more sustainable model for office real estate because it enables higher utilization. And that makes the world a better, greener place.