Then & Now: The History of Coworking Spaces
Now that the pandemic is in the rearview mirror for most businesses and professionals, most are heading back to the office. But with many businesses reducing their office footprint or even eliminating it altogether during the pandemic and many workers resisting a return to working from a fixed workspace five days a week, eight hours a day, “work from the office” looks much different than it did before the pandemic.
Coworking Spaces Hit Roadblocks But Are Rebounding Fast
While remote work arrangements are certainly here to stay for some professionals and even entire businesses, hybrid work models seem to be most predominant. In these situations, companies allow employees to work certain days from their home offices but expect them to come to the office on other days. These offices aren’t always permanent workplaces, however. Lower cost and greater flexibility of coworking spaces were already driving rapid growth before the pandemic.
While coworking space—like many other economic sectors—experienced a decline in 2020 and 2021, their adoption rates are rapidly accelerating this year. The Business Research Company expects a compound annual growth rate (CAGR) of 18.9% this year and to sustain a 17% CAGR through 2026.
Coworking Space—From 1995 to the Present
Coworking space was not always as popular as it is today. It has come a long distance in relatively short period of time. The following is a quick review of coworking space—from its founding to where it is headed today.
1995 – 2004: Dabbling in Coworking Space
The beginnings of coworking space can be traced back to 1995 in Berlin, Germany. C-base was one of the first hackerspaces in the world and was community-oriented and offered its members a physical location where people could meet and work.
But despite this initial success, it would be another decade before they began to appear in earnest. Regardless, various experimental coworking spaces sprang to life in isolated instances during this time frame. For example, in 1999, a location at 116 West Houston (which was eventually named Nutopia) opened as a work club tailored to the creative industry. There were no walls separating the approximately 20 professionals. That same year, 42 West 24 in New York City—which was run by a software company—opened. When the dot-com bubble burst, the software company lost many clients and employees. In response, 42 West 24 gained new members from various businesses. Coworking spaces were not simply confined to New York City. For example, a community for entrepreneurs opened in Vienna, Austria. Operating under the name of Konnex Communities, former hat factory space became the first local network of coworking spaces.
2005 – 2010: Coworking Becomes a “Thing”
Brad Neuberg launched the first official coworking space in San Francisco on August 9, 2005, as a reaction to “unsocial” business centers and the unproductive work life of a home office. Located at Spiral Muse, the coworking space was organized as a nonprofit co-op. For professionals, it offered five to eight desks two days a week, free Wi-Fi, shared lunches, meditation breaks, massages, and bike tours. The office closed at 5:45 pm. After one year of operation, Neuberg’s coworking space was replaced by the Hat Factory that added several co-founders—including Chris Messina, who is most known for his creation of the Twitter hashtag.
Official coworking spaces also sprung up internationally—the “Hub” at London’s Angel Station and St. Oberholz in Germany. The former offered over 40 coworking spaces, while the latter resembled a café with free internet access and was highlighted in a book titled, We Call It Work. Berlin’s first “official” coworking space, called Business Class Net, opened in 2007. It was located in the gallery of its founder, a former artist. “Coworking space” appeared for the first time as a Google search result in 2007. “Coworking” also got its own page on the English version of Wikipedia that same year.
Unofficial coworking meet-ups took place at South By Southwest in 2008 and 2009. Out of these arose the Global Coworking Unconference Conference in 2012. By the end of 2008, it is estimated there were about 160 coworking spaces worldwide.
In 2009, the first book on coworking was published—I’m Outta Here!—which argued that coworking space will make the office obsolete. The Betahaus in Germany launched in 2009 and coworking was introduced by the German publication Der Spiegel—the first country in Europe to use the term coworking. In 2010, the coworking movement celebrated its first @CoworkingDay—the five-year anniversary of the Hat Factory. It also marked the first coworking space, which took place at the Hub Brussels. At the time, estimates pegged the number of coworking spaces at 600 globally.
2011 – 2015: Adoption Coworking Space Gains Momentum
The year 2011 saw a significant spike in interest—both in terms of professionals but also businesses seeking to develop their own coworking space. For example, coworking space Modul 57, founded by one of Europe’s largest tourism companies TUI, launched with a headquarters in Hanover, Germany. Bank ING opened its own coworking space in Toronto, Canada—naming it Network Orange. Furniture manufacturer Steelcase began showcasing its own internal coworking space to promote its office furniture.
By the time 2012 rolled around, the number of global coworking spaces had grown to 2,000. During coworking space shows GCUC, Coworking Europe, and Coworking Spain, Twitter users sent over 93,000 tweets with the hashtag #coworking. The number of professionals working from coworking space surpassed 100,000 in 2013, and the number of coworking spaces jumped to 3,000. These were no longer just one-off coworking spaces, but rather conglomerates of coworking spaces; nine networks operated in more than five locations. Nevertheless, most coworking spaces remained independent, with only one or two locations.
The New York Times published an article in 2015 that discussed the concept of “Co-Working on Vacation: A Desk in Paradise” that delved into working and living on Gran Canaria in the Canary Islands (a Spanish island off the coast of northwestern Africa). This gave rise to worklocation, whereby digital nomads bring their work to any location in the world.
The year 2016 saw a number of large companies adopt coworking space for their office models. HSBC moved its employees to coworking space in September 2016, KPMG rented hundreds of workspaces for its employees in London and New York City, and tech giants IBM and Microsoft began allowing their employees to work from coworking spaces.
2017 – 2018: Exponential Growth and Hype Spur Coworking Space Expansion
In 2016, WeWork launched a combination of coworking and coliving space in New York City, which included micro-apartments with one or two bedrooms. Helio GT30 opened in Stockholm—the first coworking space in Sweden. In addition to coworking spaces and meeting rooms, it offered professionals gyms, restaurants, a bar, podcast studios, and even outdoor offices. By the time of 2017, WeWork had become one of the most valuable tech companies in the U.S. Harvard Business Review published an article in 2017 that highlighted the numerous benefits of coworking—flexible hours, no commute, and autonomy and control over how you work. The author also added feeling less lonely by tapping into the human interaction and social aspects of coworking space as a benefit.
Recognizing coworking space was fast becoming a critical driver of the digital economy, growing numbers of investors began to show interest in the coworking space market. Notably, perceiving a shift in the market from permanent office space to coworking space, real estate companies began to work on their own coworking plans.
By the time of 2018, the number of coworking spaces in the world had rocketed to nearly 17,000 and were used by 1.65 million workers. In London alone, coworking space represented over 20% of all new office spaces.
2019 – 2021: Headwinds and Setbacks Slow Coworking Space Growth
For the first time in their history, coworking space encountered a series of challenges between 2019 and 2021. The highly publicized failed IPO of WeWork in 2019 that led to CEO Adam Neuman’s departure was top headline news. The company’s value plummeted from $47 billion to $3 billion overnight, enabling its biggest investor SoftBank to take control of the company and change management.
The global pandemic affected nearly every aspect of the economy, and coworking space was hit hard. As more than half of the workforce suddenly found themselves working from their home through 2021, the demand for coworking space slowed significantly. Deskmag reported that coworking spaces lost an average of one-fifth of their leasable desks, with capacity falling the most in megacities. Overall membership in coworking spaces at the end of 2020 was about one-quarter lower than it was at the beginning of the year. In general, coworking space was used half as often as before the pandemic.
2022 and Beyond: Enabling the Remote Work and Hybrid Work Economy
The state of coworking space changed dramatically this year when workers returned to offices. But this was not a return to the pre-COVID-19 status qua. Rather, with many workers relocating—sometimes across states—businesses found that their remote work policies needed to change and a larger share of the workforce is now remote versus on site. And rather than returning to having workers work five days a week, 8 hours a day from a fixed, permanent office space, the majority of businesses have adopted some form of a hybrid work arrangement. Nearly 3 in 10 believe a three-day-a-week office schedule, with the other two spent working from a home office, is ideal; 20% believe employees only need to come to an office two days or less a week.
Coworking space is filling a significant gap for many businesses and professionals. Some businesses eliminated permanent office space altogether during the pandemic. The same is true of many solopreneurs. Leasing new space simply doesn’t make sense. But working from a home office 100% of the time isn’t a viable option either. Instead, these businesses and entrepreneurs are using coworking space as a supplement to work from the home office; this gives them a professional office to work from and networking opportunities with other like-minded professionals. They can also tap into the accoutrements of a modern coworking space. For example, coworking space through Davinci Meeting Rooms comes with lobby greeters, administrative support, virtual office address options, meeting rooms, food and beverage catering services, and more.
For businesses and professionals adhering to a hybrid work arrangement, coworking space can serve as an alternative workspace where employees who live near each other but far from the company office can work—whether several days a week or once a month. The ability to leverage coworking space in an on-demand fashion is one of the benefits.
There are 6,200 coworking spaces today with 933,000 people in the U.S. alone using them. In spite of the pandemic, this is up around 55% over the past five years. And while it took nearly two years for offices to open up again, coworking spaces are certain to remain a critical facilitator of the modern digital economy for many—a number that will continue to increase.