This article first appeared in the 4th quarter 2018 edition of Personal Finance magazine.
For this exercise, let’s assume that you and your best friend from university are developing an amazing app that will transform the mobile payments industry and ultimately earn you millions. Unfortunately, your parents want their spare room back (it’s been six months, after all), and anyway, a suburban bedroom isn’t the best place to meet the angel investor who’ll take your enterprise to the next level.
So you go looking for offices. Right now, it’s just you and your friend, Mike, but in time, you hope to employ all manner of clever people and build a little empire, so perhaps you’ll need to make provision for future expansion. Even card-carrying millennials need to do a little forward planning.
Your first shock comes when you explore rental options in the CBD – you know, because you want to project the image of a professional, go-getting business – and discover that an office space the size of a modest studio apartment would cost you upwards of R8 000 a month (according to the agent, that’s a relative bargain). Oh, and the landlord wants you to sign a three-year lease.
That’s only the start. Next, you factor in the cost of office furniture, desktop computers, a coffee machine (scholarly research suggests that successful start-ups are fuelled mostly by caffeine), an overhead projector and large screen (for those all-important presentations to investors and clients), electricity, cleaning staff, telephonist… the must-haves, and the concomitant costs, are seemingly endless.
You appear to have two options: either you give up on your dream and become an estate agent (it’s an honourable profession), or you explore the solution known as coworking. Six months later, with half a dozen successful pitches under your belt and the money flowing in nicely, you cannot believe you considered anything else.
Later, you come to realise that some of your more successful initiatives were inspired by casual interactions with other co-workers, most of whom share your disdain for corporate doublespeak, not to mention soulless offices and workmates who append motivational one-liners to their PowerPoint presentations and insist that coffee is bad for you.
Martijn Roordink, Amsterdam-based co-founder and chief executive of the globally represented coworking network known as Spaces, a subsidiary of the IWG group, says tech companies have been trying for years to establish a culture that works for their employees.
Roordink explains: “Often, tech businesses can be quite introverted by nature. They have hugely smart people working super-hard, and it can be a challenge to find the right mechanism to ensure people get away from their screens or R&D labs, speak to other people, interact face to face and have the sorts of conversations that can spark great ideas. Without these interactions, tech wouldn’t be able to continue innovating.”
In a flexible workspace built on collaboration, says Roordink, this effect is amplified because people are speaking to fellow creatives. He cites a typical Spaces office layout – where the lifts are hidden – as an example of how his company encourages interaction and collaboration.
Why on earth would they hide the lifts? “To stop people hurrying to their office space and encourage them to pause and have a conversation. You’ll also find that our café-delis are in just one central area in our buildings.” Again, why? “To ensure that people have more opportunities to meet others when they are getting their coffee fix. Contact breeds collaboration, which leads to creativity.”
Rona Sauer, Southern Africa operations director for Regus, another IWG subsidiary, says the prime location of their workspaces is critical to their success. “We are represented in many landmark buildings in South Africa and around the world, with over 3 000 locations in 110 countries. All are accessible, upmarket and comprehensively staffed and equipped. Our clients do their work, and we take care of everything else.”
Services and facilities range from a “hot desk” that can be rented on a daily basis to a dedicated office suite, fully equipped conference rooms of varying sizes, events catering, telephone answering service, café, common areas for conversations and relaxation, and more.
Says Sauer: “We pride ourselves on being able to build a solution for every client, and flexibility is our watchword. Full-time IWG clients – that is, with a dedicated office – have access to lounges in other towns, so if they want to miss the rush-hour traffic in Cape Town, for instance, or they have meetings in Paarl or Stellenbosch, they can access our other facilities and drive to the city when the traffic has eased. They also enjoy access to our many overseas locations, and can hire meetings rooms at discounted rates, making it easy to expand their operations into other countries.”
It doesn’t stop at office services. Spaces and Regus occasionally invite interesting and relevant people to deliver presentations that are likely to be of interest across the membership spectrum, and sometimes, when a client achieves a significant success, everyone is invited to share in a celebration.
Says Sauer: “That’s the beauty of an environment like ours. You get to work with like-minded people and feed off their energy.”
It’s all about community
Workshop 17, another thriving network of shared workspaces, has facilities in Cape Town’s V&A Waterfront, Sandton’s CBD, Paarl, Maboneng and Rosebank (Johannesburg). With a mix of clients ranging from corporates to start-ups, from experienced entrepreneurs to individual freelancers with tight budgets, it takes pride in its sense of community, aiming to accelerate innovation and entrepreneurship “for a positive social and economic change”.
The Sandton facility, conveniently located opposite the Gautrain Station, sits firmly in the Big League of coworking spaces. Aside from its sprawl of ultra-modern offices and meeting rooms, lounges and meeting booths, it offers a formidable 200 “hot desks” spread over two floors as well as a 130-seat auditorium.
There are two silent co-working spaces where no talking, music or calls are allowed. As Workshop 17 explains it: “This ensures our members have absolute silence when chasing that deadline or just need an hour or two to focus.” They also offer access to friendly lawyers to help members draft contracts, and provide an online platform to keep everyone in touch with what’s happening.
Marketing manager Britta Dahms says Workshop 17 offers a range of membership options, from “community” and “occasional” to “light” and “full”. Flexibility is key to making it work, she adds. For instance, if a single month’s commitment is all you require to complete a project, it will cost you R1 380. This buys you a “hot desk” for up to 60 hours, fast (uncapped) WiFi and several other perks.
A dedicated desk will set you back a similar R1 380 a month, but requires a minimum 6-month commitment. Light and full memberships start at R1 932 and R3 381 respectively, the prices varying according to the length of your stay, and there are substantial discounts for a second person. If you’re a freelancer on a very tight budget, you can acquire community membership for under R700 a month, giving you access to the open café area and that all-important WiFi.
Says Dahms: “We also have a day-use rate for which our members will receive a discount should they want to work at a different location in a different city. Our full membership offers global access to all our locations at no extra charge, and we also offer call-answering and reception services to all our members, including a business address. These options are very important for start-ups and freelancers as well as professionals, whether they are part of a small company or working solo.”
According to Dahms, newly emerged entrepreneurs, freelancers and other clients can be naïve when it comes to the cost of launching and operating a business. She and her colleagues help potential members understand why renting a spot in Workshop17 makes financial sense by spelling out the cost of a conventional office lease, equipment, administrative help, communications and other overheads.
They’re especially pleased when the synergies between members end up improving productivity and inspiring innovation, says Dahms. “We have many stories of companies, freelancers and start-ups who have connected with each other in our locations, and it gives us great pleasure to be able to witness this and be a part of their journey.”
Although they don’t go out of their way to solicit female members, adds Dahms, there’s a fair male-female split across all their spaces. Oh, and they don’t push the sharing thing. “We know that not everyone is a natural co-worker, and that’s fine. If you simply want to put your head down and work without interruption, you can find a place with us.”
How does the community-building work? Dahms explains: “We have frequent social get-togethers where all members of the communities can join in. Our smaller meetups have also been very successful; this is where we would invite a select number of members for breakfast who we know will be able to inspire and assist each other with their growing businesses.”
Among Workshop 17’s partners at the V&A Waterfront is Startup Grind, an organisation – part of a global community for entrepreneurs – that hosts monthly events highlighting the successes (and occasional failures) of start-ups in the Mother City. Among its recent presenters were technology whizzkid Bevan Ducasse of WiGroup; South Africa’s “first lady of gin”, Simone Musgrave; and crowdfunding guru Patrick Schofield of Thundafund and BackaBuddy.
Flexibility is the key
Evidence suggests that coworking spaces are especially attractive to millennials (age group 22 to 37 years) because they acknowledge their urban-centric instincts (by offering easy access to essentials such as coffee shops, restaurants and gyms), cost much less than conventional offices, saddle them with fewer responsibilities, offer excellent networking opportunities (partly due to the ever-changing demographics), reduce the risk of disaster should their enterprise go belly-up, and – to be fair, this is pure speculation – satisfy the commitment-phobes.
Matthew Mallett, senior sales executive with data mining and analytics firm Vantage Data, says the shared workspace concept gives them “a lot more options” than conventional business premises, with its long leases and other commitments.
The flexibility of the arrangement is crucial, says Mallett. “It gives us the opportunity to be nimble, to scale up or down as required by our project-based engagements.”
Are clients happy with the shared-space concept, or are there are few die-hands who feel reassured by proprietary business premises and staff at their desks from nine to five?
Mallett is firm on this one: “There is no negative perception. You can house a business in a boardroom or in offices like the one we’re in right now… offices that look professional and modern, and allow you to deliver presentations with all the mod-cons. Of course, these places also provide great opportunities for networking.”
What are the non-negotiable elements in shared workspaces such as those offered by Spaces and Regus? Replies Mallett: “High-speed connectivity is paramount, especially for tech companies. Aside from that, you have a complete support system … everything you need is at hand. There’s a great waiting area, too. Spaces works very well for us; it’s far and away the most cost-effective solution for our business.”
Mallett enjoys the networking opportunities and is impressed by the sense of altruism he’s found in the Spaces environment. “Although some intellectual property obviously has to be protected, we’ve found that everyone here wants to help. It cuts both ways, of course: if someone needs your help, you can add value.”
Lance Connolly, head of relations for a blockchain research and development company called CoinFabric (blockchain refers to a growing digital ledger of records, called blocks, which are linked using cryptography and are mostly associated with cryptocurrencies), says his firm was the first client at the new Spaces facility in the Sunclare building in Claremont, Cape Town – and they’ve never looked back.
“It’s super-convenient, never boring, always diverting and exciting. We operate from three dedicated offices in Spaces and have absolutely everything we need. For instance, for three days a week, we start early with a boxing session, followed by a shower, and start our work feeling pretty good. We have underground parking, good security, and access to everything we need.
“There’s plenty of interaction with other people to keep things interesting, and the benefits have become obvious. For example, we discovered that someone here is a voice coach, so now he’s giving my partner, Dean, some useful instruction in public speaking. It’s all about the sharing economy, and it works for us.”
Renting space at Regus or Spaces costs very little by any measure. For instance, a “hot desk” (that is, first come, first served) in a shared office is available from R41 per person per day. A small, inward-facing private office may be rented from R61 per person per day, whereas an office with a view costs from R76 per person per day. Furniture, layout and decorations can be tailored to suit your needs, and lounge membership is free.
We really want your business!
In a somewhat daring move, a coworking collective called Inner City Ideas Cartel is offering to buy selected “impact” tenants out of their current leases. They explain their thinking: “It’s about putting our money where our members are to make sure the broader coworking community accelerates.”
In that case, who would qualify? Says ICIC: “If you’re a freelancer, founder in the tech scene, the advertising industry, an accounting firm, a member of the legal community, in HR or recruitment, we would like to meet with you to investigating buying you out of your current lease, allowing you to join our network as quickly and as effortlessly as possible.
“If you are happy in your current office or coworking space, then we would like to explore jointly hosting networking events. We can’t let a little thing like a lease get in the way of good businesses meeting one another.”
Explains founder Schuyler Vorster: “The ICIC offers scalable workspace for growing businesses that need a community conducive to productivity and opportunity… this is facilitating both.”
It has to be said that some coworking spaces are extremely modest, and sometimes located in areas that are not exactly upmarket. Against that, they can have a charm all their own, and tend to be relaxed and friendly. It all depends on what you need, where you live, and the constraints of your budget. In some cases, you will pay significantly less for your space than in one of the bigger facilities, with their higher overheads.
A case in point: freelance SEO (search engine optimisation) expert Danie le Roux, who recently arrived in Cape Town after two years of country-hopping in Europe, said he regularly used coworking spaces in France, Germany and elsewhere, and was spoilt for choice in South Africa.
“This country is right up there with the best when it comes to shared working spaces,” he says. “I can rent a hot desk and everything I need to do my work at a fraction of the cost of regular office space. All I need to do is plug in my laptop, and off I go.
“For people based in prime locations, parking fees can be an issue because when they spend days at a time in an office, even in a coworking space, the cost can be hefty. Because our public transport system lags way behind the rest of the world, many people don’t see this as an option. However, I don’t have that problem because I can catch a bus outside the usual rush hour, take a 10-minute walk to my coworking space, and never need to worry about the electricity bill or a new printer cartridge!”
A freelance journalist, who prefers not to be named, says he likes the coworking option for a number of reasons, chief of which is the ease with which he can itemise his expenses. He explains: “When I worked from home, I had a constant battle with SARS over which expenses were legitimate or otherwise, including a claim for cleaning and a small share of the electricity bill. There was also an issue when I sold my house.
“Now that I’m in a coworking space, I can claim for absolutely everything I use to earn my income because it’s clearly spelled out, and all obviously legitimate. My laptop is the only exclusion, but even that has some useful depreciation value. On occasion, I have even billed a client for the hire of a meeting room when I was required to interview several people at the same time. The coworking space billed me, and the client paid without protest.”
The bigger picture
A coworking forecast for 2018-2022 by the US-based organisation Small Business Labs, in collaboration with GCUC (Global Coworking Unconference Conference), projects rapid growth over the next five years, albeit “slower than the industry's recent dizzying pace”. Its forecast: global coworking spaces will grow from 14 411 in 2017 to just over 30 000 in 2022, accommodating 5.1 million members.
According to the GCUC study, some 3 975 of these spaces were in the Asia/Pacific/India region in 2017. The United States accounted for 3 205 spaces, Europe for 3 0970 spaces and the rest of the world for 1 540 spaces. No official figures are available for South Africa, but an estimate last year put the number of coworking spaces at around 67, suggesting that the real number – taking into account the small spaces that pass under the radar – is much larger.
Globally, it seems the biggest challenges facing the backers of coworking spaces are too little seed capital, a lack of partners, the identification of suitable locations, a lack of understanding about the coworking concept, a lack of potential members, and bureaucratic barriers.