Nap pods, arcade games and craft beer on tap may have been the sole workspace domain of techie start-ups a decade ago. But today’s coworking or flex spaces are encroaching on their turf.

With an emphasis on millennial buzz terms such as collaboration, community and co-creation, flex spaces already account for up to 20% of office take-up in global capitals such as London, New York, Paris and Amsterdam. And while it’s still in its infancy in SA, the coworking trend is poised for rapid adoption in the country, following the announcement last week that WeWork is opening shop in Joburg.

The New York-based company, which Forbes magazine values at a colossal $21bn, is widely lauded as the catalyst for the so-called workspace revolution that is changing where, how and when people work.

Co-founded by American entrepreneurs Miguel McKelvey and Adam Neumann in 2010, WeWork already operates 580 office locations in 100 cities; about 400,000 people rent a desk across its global office network.

The company’s Joburg premises — its first site in Africa — will be located in Rosebank Link, a new 15-storey building on Oxford Road, a stone’s throw from the Rosebank Gautrain station. WeWork is renting six floors of the state-of-the-art, four-star green-rated building from JSE-listed Redefine Properties.

Patrick Nelson, head of real estate for WeWork Europe, Middle East & Africa, says the Rosebank office will accommodate about 2,000 community members (WeWork lingo for people who work from its premises).

He says the workspace is not only aimed at entrepreneurs, freelancers, start-ups and SMEs looking for an alternative to the home office; WeWork also targets corporates with 100-plus employees. In fact, Nelson says 30% of WeWork’s global membership is from large companies, including the likes of IBM and Microsoft.

WeWork’s entry to SA will no doubt unsettle local players that have already carved a small but growing niche for themselves across a number of key business hubs. Local coworking brands gaining traction include Workshop17, co-founded by JSE-listed Growthpoint Properties with premises at Maboneng, the old Rosebank fire station and central Sandton in Johannesburg, and the V&A Waterfront in Cape Town, among others; Spaces, owned by Regus parent company IWG, whose sites include the Atrium on 5th in Sandton City; The Workspace, which has more than 10 locations across SA; and FutureSpace, a joint venture between Investec Property and Giant Leap.

Flex space providers have a big opportunity to undercut conventional players in SA by offering shorter lease periods
Thomas Mundy

Most of these offerings allow members to sign up for different packages, ranging from pay-as-you-go plans to a fixed monthly rent of as little as R1,000 for a three-, six-or 12-month period. Use of business infrastructure such as a front reception desk, office supplies and high-speed internet is included. Workspaces typically have a trendy, designer aesthetic and comprise a mix of "hot desks" in open-plan areas, glass-panelled private offices and meeting rooms, as well as lounges and chill areas with food and beverages on tap.

The key selling point is that shared workspaces offer a flexible and cost-effective alternative to renting your own space in a conventional office building with a lease that ties you in, often for five years or more.

The question is whether there will be enough demand to support all the shared workspace providers opening premises across SA’s business hubs.

Joburg-based Thomas Mundy, who heads US-listed JLL’s real estate advisory division for Sub-Saharan Africa, believes the coworking trend has strong growth potential in SA, given the country’s history of long and rigid commercial lease structures.

SA office tenants typically have to lock themselves in for anything from three to 10 years at a fixed monthly rental cost that includes automatic rental escalations of about 7%-8% a year.

Tenants who want to amend or cancel their lease term before renewal usually face steep penalties.

"Corporates want more flexibility. So flex space providers have a big opportunity to undercut conventional players in SA by offering shorter lease periods," says Mundy.

He says flex space in most global capitals is no longer a fringe business. Just as Amazon has had a huge impact on demand for retail space across the globe, a flex provider such as WeWork could equally disrupt the commercial real estate sector, he believes.

"Last year 20% of all new office take-up in central London was flex space. We see that figure rising to 30% within five years."

Other global capitals such as New York, Amsterdam and Paris are experiencing similar growth rates, he says. "We believe SA is also going in that direction."

What it means

Coworking offers a flexible alternative to conventional office leases

Mundy lists a number of factors that will drive demand for flexible office space, including the proliferation of cloud computing, virtual private networks and super-fast Wi-Fi and 4G (soon 5G) connectivity, which means office-type work can be carried out anywhere and at any time.

He says increased mobility has already resulted in a dramatic expansion in the range of spaces in which office work is conducted. "And as the composition of the workforce becomes more fluid, the need for flexible space will continue to increase."

There is, of course, potential downside to the collaboration trend. In some industries, most notably the IT, legal and financial services fraternities, information and knowledge sharing can create security issues. Coworking can also become problematic if it leads to a drop in productivity.

Not every provider of flex or coworking space will be successful. The general view is that the preferred model will likely be a hybrid one, which caters to the needs of all types of tenants — not only start-ups and SMEs, but also midsized and large corporates that have staff who can work remotely or part-time.

Mundy says many of the operators that initially marketed themselves as coworking companies targeting entrepreneurs and start-ups have since adapted their space and services for a corporate audience, offering a hybrid of private offices and coworking spaces.

About 850,000m² of hybrid space has been added in the top 20 European flex markets since the start of 2016.

But the old real estate adage "location, location, location" still applies. Mundy says shared working premises will only attract tenants if they offer easy access to business hubs and transport infrastructure. This is especially so in SA, given the country’s limited public transport network.

Shalane Yuen, director of the Trevor Noah Foundation. Picture: SUPPLIED
Shalane Yuen, director of the Trevor Noah Foundation. Picture: SUPPLIED

Making it work

Shalane Yuen, director of the Trevor Noah Foundation, runs its SA operation from The Workspace, a coworking space in Melrose Arch, Joburg.

Why did you go for this option instead of a conventional office?

When the foundation launched last year, we operated as a small start-up and worked from home. As our engagement with partners and donors increased, I needed access to meeting rooms in a professional environment. However, [with] our team of three … I can’t justify renting an office just yet.

What does the foundation do?

We partner with government schools and mobilise philanthropic capital to invest in psychosocial support, skills development and career guidance to help improve the lives of vulnerable young people.

What does your typical work week entail?

We’re in the office 20 hours a week, at most. Most of my time is spent liaising with our partners and exploring new opportunities. That means I’m travelling to and from our partners, located around Joburg, or meeting potential partners at The Workspace.

I often handle e-mails and admin at home in the evenings, as some of our board members and key stakeholders are based in the US.

What are the pros of coworking?

A serviced reception, a clean working space, access to a kitchen, and not having to manage the admin associated with renting your own office. You also gain networking opportunities as you never know who you are going to meet in shared spaces.

What are the cons?

The premises are only accessible at set hours, typically 8am to 5pm, Monday to Friday. And you can’t personalise or brand your “own” space.