A marketing manager in an oversize sweater scrolls through her phone, a latte sitting on a small table by her side. Two workers meet nearby on velour restaurant-style booth seats. Others are taking video calls in private, soundproof phone booths scattered throughout the one-story brick building housing the first location of coworking space provider Common Desk in Houston.
Common Desk opened the site, complete with hand sanitizer and signs requiring face masks, in November, even as many U.S. coworking providers struggled to pay rent and make payroll during the pandemic. Major coworking companies such as WeWork, Industrious, Knotel and International Workplace Group have trimmed staff, slowed expansions and canceled large leases because the coronavirus is discouraging the kind of social contact that's at the center of coworking's shared office space concept.
Other coworking companies have filed for Chapter 11 bankruptcy protection. About one-fifth of the nation's 4,500 coworking locations, representing 25 million square feet, could close or change hands as a result of the pandemic, according to estimates from real estate brokerage JLL.
While the coronavirus has been a tough test, some regional flex space operators have been able to survive and, in the case of Common Desk, even grow in the pandemic. Dallas-based Common Desk has opened five locations this year and signed five contracts for locations in Texas and North Carolina.
In early 2020, Common Desk had some of its best revenue-producing months, CEO Nick Clark said in an interview. But activity lurched to a standstill by April when fear of the virus was at a fever pitch. The company launched a work-from-home membership with its own Slack channel for members to chat and daily virtual events like “wine down” Zoom happy hours to try to keep morale up. When needed, the company deferred fees or offered discounts because of a lost job or business.
“I think our concern was losing that base community,” Clark said. “I'm grateful we were just big enough as a company to weather the storm … but we're also small enough to where we really tried to roll up our sleeves and have one-on-one conversations [with members]. It seemed to work; it held morale in place within our membership, within our community.”
The way Common Desk structures deals also helped, Clark said. Instead of signing traditional leases with landlords, the company signs management agreements with a revenue-sharing mechanism so the better the space performs, the more money landlords make. So Common Desk didn’t have to worry about deferring rent or giving back space.
By June and July, Common Desk members started returning. Tour activity and membership occupancy tracked closely to the ebb and flow of coronavirus cases, Clark said.
“It seems like every time COVID has a spike, we see some effects of that. Like you see a little pullback on tour traffic, things like that. Our activity is still not back to 100%. It's certainly not back to January, February numbers, but all in all, the spaces" seem fuller, Clark said.
Common Desk signed the contract for the East Downtown Houston location with developer Ancorian in 2019.
The location was 20% preleased upon opening, slightly under the standard 25%, said Clark. There were delays he normally wouldn’t expect with construction and getting furniture, fixtures and equipment, and the summer opening was pushed into fall. And with large gatherings discouraged, he couldn't hold the usual grand-opening party to draw attention.
“The marketing is probably the most frustrating just because we would like to do more and we have to depend on digital ads as opposed to doing some of the fun activation-type events,” he said.
However, Clark is aware there could be even more challenges if he had locations outside Texas, which started reopening in May. Dallas, Houston and Austin, where most of Common Desk's portfolio is located, have office use rates of 34% to 38%, compared to the national average of 24%, according to security firm Kastle Systems, which tracks key card activity in office buildings where it has clients.
Flexible Space's New Role
The transitioning neighborhood known as EaDo is where railroad tracks cut through former industrial warehouses that have been turned into retail space, condominiums or lofts painted with murals. Common Desk’s interior has cement floors, unfinished wood tones and exposed ceilings. Vintage furniture and brightly colored couches blend with midcentury modern pieces that look ripped from a West Elm catalog.
Across the street, a new luxury apartment tower being developed by Marquette Companies is under construction a few blocks from a small homeless encampment.
Common Desk's new office caught the attention of Jasper Gumatay. He lives in a townhouse in the neighborhood and spent five months working from home. The Houston salesman spent most days toiling away on endless Zoom meetings while his girlfriend worked on a separate floor. Days blurred together with little human interaction or trips outside the house. Gumatay, a 39-year-old extrovert, was zapped for energy.
“I’m the type of person who gathers energy from people. I was at home for five months, but the quality of work and productivity levels were low. I was low-key depressed,” said Gumatay, who works for telecommunications firm Logix.
His craving for social interaction pushed him to try out the Common Desk space and now he pays out of pocket for a coworking membership. Even though Gumatay's office reopened in July with limited access, he had gotten used to not having to deal with a long commute and traffic and chose to stick with the Common Desk location, where his commute totaled eight minutes round trip.
Nationally, several months into the biggest remote work experiment yet, most U.S. office workers, or about 83%, want to work from home at least one day a week, and about 55% of employers anticipate most of their workers will do so long after the pandemic, raising questions about the future of office space, according to a study from consultancy PwC.
Realtor Joe Haas commutes to Common Desk’s EaDo location from Pearland, about 22 miles south. Although Haas could work remotely anywhere, working from home wasn’t the best environment for launching his new business, he said.
“I had a hard time focusing between the cats and the dogs and my wife. There were too many distractions. That’s why I like it down here. Plus, I like the energy, the vibe,” Haas said in an interview.
Haas and business partner Anthony Shane preferred to launch their new real estate firm, the Wolf Real Estate Group by eXp Realty, out of Common Desk’s EaDo spot because of the ease of training new employees, free parking and other perks. They also wanted a professional space to bring clients.
Wearing a fabric face mask and elbow bumping instead of handshaking, Haas said he knows the virus is real, but he feels comfortable working out of the house and has traveled by plane.
“I take necessary precautions to stay safe, but I’m not living in fear of catching COVID away from my home,” Haas said.
Small businesses and self-employed workers like Haas are expected to continue to support coworking, but large clients are becoming more vital for survival. Facing uncertainty, more flex space operators are chasing after larger companies, said Norm Doucet, Cushman & Wakefield’s director of flexible workplace operations.
Bigger businesses sign one- to two-year leases, giving the coworking owner more certainty than the shorter agreements with most members, Doucet noted. Coworking companies are also allowing members access to multiple properties, he added.
Doucet expects the coworking industy to shrink this year as companies close underperforming locations. Overall, there haven't been widespread closings yet, with total coworking inventory dropping only about 0.2% from the second to third quarters, according to Cushman & Wakefield. Despite the challenges, Doucet argues flexible space will play a role in return-to-office strategies.
“Our philosophy is the workplace is now an ecosystem. The headquarters now is at the center, and there are spokes on the wheel with an employee’s home office, a satellite office and a third-party or flexible space option," Doucet said. "The office itself will not go away, but I do think that the way in which we leverage and utilize office versus work-from-home versus work-from-flex is going to change. And I think it's a great thing.”