Coworking Europe's 2023 edition in Porto was full of energy and focus. Operators are eager to learn and face the challenges and capture opportunity in the market. Here's our recap of the event.
We joined over 400 coworking aficionados in Porto at this year’s Coworking Europe conference. It’s always a grand event, bringing together the movers and shakers in flex from so many different countries and experiences. The energy was ever present, the conversations lively, and the various perspectives on navigating today’s market invaluable. Below we present our key takeaways from the event.
An increasing focus on profitability
Community is important, but profitability is a must. Carsten from Deskmag presented results from a survey conducted on profitability, a common challenge faced by many operators. He found that more coworking spaces are profitable since the pandemic. It might be linked to finding that 46% of coworking spaces offer more private offices since before the pandemic. Although 43% say they decreased the amount of community activities, profitable spaces claim to dedicate more time to community and hospitality.
According to Instant’s state of the market report, presented by James Rankin on day one, 87% of operators in Europe are experiencing the challenge of increased cost of doing business, along with increased competition and expectations from new customers, indicating pressures around profitability and margins. Historically this isn’t a massive problem, having the ability to pass these costs on to occupiers; but in today’s market there is less confidence therefore, operators are seeing a profit squeeze given pressures on both sides. In the room of almost 400 industry players, only 4 people were able to raise their hand saying they passed the costs on to their customers. Despite these shared challenges, across Europe demand for flex space has grown by 18% compared to pre-pandemic levels.
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Small cities unlock big opportunities.
According to Instant’s data, smaller cities right now have the strongest growth opportunity, where supply growth over the last year has declined and demand has growth comparably, such as Bucharest and Copenhagen. By contrast, in some of Europe’s biggest cities with the most diverse flexible offering, such as Barcelona, Paris and Amsterdam, we continue to see supply growth but with demand volumes stagnating at best by comparison.
Broadly speaking the highest levels of demand growth can be found in Eastern Europe and southern Europe’s secondary and tertiary cities such as Porto and Lisbon. This is not just a European trend. Investment continues to flow into Europe’s major cities while demand for flex space at least continues to expand into new markets as the fundamentals delivered by flexible space appeal to an ever-widening range of businesses.
EMEA Ahead in the Return to Office
Emma Swinnerton’s presentation highlighted that the EMEA region is comparatively back in the office more versus the UK and other regions. Whether or not hybrid is the permanent future of the office, it has certainly established a win/win for flexible workspace. From landlords increasing their self-delivery models and being more open to management agreements to growing demand for flex in multi-tenanted buildings and managed office delivery, flex space is undoubtedly an enabler of driving space utilisation as well as providing spaces where today’s employees want to work. And workspace providers are slowly falling in line with that.
An eye-opening stat from C&W presented at Coworking Europe is that 76% of office stock across Europe is at risk of being obsolete by the end of the decade. A clear sign of opportunity for flex spaces. And a foreshadowing of a fragmented market with two tiers of products. In the bottom tier, landlord will struggle to place tenants. Flex alone won’t bring them in and make them profitable. Flex must be placed in the right building and the right location otherwise the profitability challenge will persist.
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Influx of Investment from Landlords and REITs
Flex is the fastest growing category, outpacing conventional office. Results from our Future of Flex survey backs this up, with 83% of landlords in the EU seeing demand for flexible space grow faster than traditional demand over the last year. However, you can’t do flex part time, explained Fernando Ramirez Baeza, from Merlin Properties, operator of Loom coworking in Spain. It’s operationally intensive and must be a dedicated business unit within the wider portfolio. Not all landlords have the internal resources to develop of flex brand and operation, but partnering with operators or third-party delivery partners is an option.
Sustainability: Certifications are just the beginning
Mike Bascombe, Head of Sustainability Innovation for Instant’s sustainability practice, joined a panel to discuss the role of certification in the flexible office sector. The operators on the panel were all either fully B-Corp certified or on the process to being so. B-Corp offers many business benefits with strong brand enhancement and practical guidance on becoming a more sustainable company, but as Mike explained, B-Corp doesn’t address emissions and that these types of certifications are just the beginning of the journey, not the end of it.
Flex has a lot to offer an office model from a sustainability perspective and it’s hard to capture on a single sheet of paper. You must magnify the impact of your initiatives impact and often, it’s the data and the ability to report it that is most meaningful, especially for occupiers. The largest established operators must address sustainability directly and by doing so offer more to their potential clients.
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All eyes on flex
Occupiers are prioritizing flexibility. They are asking providers for better services, more managed space and overall, more people-focused environments. From our experience at Coworking Europe, it’s clear that coworking and flex space operators are uniquely positioned to deliver on these requirements – and improving by the day. However, while flex is growing, and can be a healthy margin business, operators and landlords alike must still be thinking about where and how flex will work. Being armed with the right data and platforms to reach customers is critical to success, especially as the market grows and diversifies.
