When Covid-19 is finally over, some things will never go back to how they were. Office life is probably one of them.

For lots of office workers, the old routine wasn’t working. Commutes have gotten longer and longer. Dublin workers for example have the fifth-longest commute of any capital city in the EU. 

Now, working from home is the norm for office workers. Possession is nine-tenths of the law, and right now workers are in possession of the place of work. That’s the status quo. If employers don’t like it, it’s up to them to do something about it.

Employers are figuring out how to give workers what they need to get them into the office. In London, the media company Bloomberg is getting desperate: it’s offering employees a £55/day stipend for taxis.

What comes next? There’s a sense that things can’t go back to exactly how they were. A new bargain between workers and employers is in the process of being struck.

Coworking companies like Huckletree, which has seven locations around the UK and Ireland, are at the coalface. They rent big offices and sublet them on a short-term basis. To their tenants, what they offer is style, flexibility — leases that can be adapted and extended on demand — and curation — a space shared with like-minded people in similar industries.

In good times, coworking companies attracted tenants by offering them beautiful spaces, as and when they needed them. But this year, their flexibility has counted against them. Coworking companies’ tenants are entitled to leave on fairly short notice. But their own landlords are not as flexible. 

Andrew Lynch is Huckletree’s co-founder and COO. Since Covid hit, he’s been figuring out social distancing, renegotiations with landlords, and struggling tenants.

Companies now coming to us saying ‘we want a smaller space, we want it only to be able to cater for half of our workforce because we want to be able to be proactive and offer them 50% or 70% work from home time’

Andrew Lynch

But equally, there’s a sense that the world of work is getting shaken up. At a time when office life is getting redefined, a company which offers flexibility, community and beautiful workspaces might have something to offer.

For example: it seems likely that there will be a greater mix of working from home and from the office in future. But companies will find it hard to save money from this new setup if they still need to cater for peak numbers at peak times — if everyone wants to work in the office on Wednesday. So companies will be left with empty desks during off-peak times, and an unchanged rent bill.

A coworking space could help bridge that gap by providing flexible meeting spaces. Or finely-grained leases that allow companies to cater to their workers at peak times.

Huckletree’s West London auditorium

The Good

Employers aren’t happy with employees working from home at all times, says Lynch. They want to at least change the balance: “Business leaders are quite keen to get out of their house and get back out there. Now, whether that’s two days a week or three days a week or four days a week, or any which way in between, that’s the message that we’re getting.”

But getting workers out of their homes won’t be easy. Lynch says they need to be “enticed” back to work. 

“If we are going to look to entice staff back to the office, it needs to be more than just an office. It needs to be more than just desks and seats, because actually, you can do that from home for a while. And secondarily, you can do that from a coffee shop.

“People are coming to us saying, ‘Well, what else do you do, what else can you provide us with? Who else will be in this space, is there any other potential opportunities, commercial or otherwise, that we can draw from being there?’ But, secondarily is the fact that we’re more than just an office, we’re more than just desks and seats. And we’re seeing that actually trump the commercial bit.”

“Do we provide more education opportunities, more in-place education opportunities, more learning, more soft-skill learning? What other bolt-on elements can we add to Huckletree membership that rewards our team members for coming in?”

So Huckletree, with its fancy curated work spaces, is helping entice employees back to the office. Another benefit for employers is Huckletree’s flexibility:

“The leads that we’re having coming now are actually much bigger teams, that were looking at traditional office space. They are now looking at a more flexible operation. One is just flexibility of contract and commercials, so they don’t want to have to take a ten-year lease, five-year lease, etcetera. And they want something right now — they don’t want to have to wait six months or whatever.”

We’ve always said the model needed a big shake-up, because landlords were almost complacent. We were the ones bearing all of the risk… and when the shit hits the fan, we’re the one that gets lumped with the bill.

Andrew Lynch

The Bad

In a new world of more flexible work, big companies might turn to a coworking company like Huckletree. But the company’s existing member base is a different story. It’s been a tough year for them and for Huckletree. 

Huckletree was one of the coworking companies to sign a letter to UK Chancellor Rishi Sunak in April warning the industry could collapse without government support. One of the longest-established London coworking spaces, Tech Hub in Shoreditch, went into administration in August. And Huckletree was forced to close its Oslo location.

Huckletree is home to lots of small startups which don’t have the balance sheet strength to withstand a big slowdown. “Fifteen or twenty per cent of our member base was hit very hard”, says Lynch. “Anyone in travel tech, anyone in retail, anyone in logistics. We have a couple of really interesting companies doing those types of things. But their revenue went to zero — and I don’t mean like go to very little, I mean literally went to zero. Overnight.”

Startups are part of Huckletree’s business, though not the only part. To go after big enterprises, Huckletree launched a new brand last year called Huckletree Places. It’s pitched at companies needing desks by the hundred, rather than in ones and twos. 

Given the UK’s furlough scheme and working from home, big corporates need less space. “Now, unfortunately, that 200-person team is an 80-person team, with the delta being on furlough, and the leaders of the business saying that actually, we’re only going to bring back half of those when furlough ends,” says Lynch. “And actually, we’re going to be decreasing in size, so instead of being 120, we’re most likely going to be 100 or 80 in the next year.

So, what we’re having to accommodate for is the old leads looking for bigger spaces now coming back to us saying ‘we want a smaller space, we want it only to be able to cater for potentially half of our workforce because we want to be able to be proactive and offer them say 50% or 70% work from home time’. So, in a weird way we’re still catering for those bigger businesses and still having a product available for those bigger businesses. But in our experience in the last couple of weeks and months those bigger businesses haven’t needed the same amount of space than they did prior.”

Huckletree Public Hall in Westminster

What’s next

Post Covid, what will coworking look like? Potentially more big enterprises, making use of their flexibility to house workers who spend part of their week at home. Fewer open-plan offices of the old style. 

At the back end, on the landlord side, Lynch sees things changing. As he says, landlords and investors are on a hunt for yield. A new bargain with coworking tenants could solve that problem for them, by taking on a bit more of the tenants’ risk:

“I don’t think the traditional office is going anywhere anytime soon. But I definitely think the amount of it is going to be reduced and it’s going to be taken over by a much more flexible offering which provides the landlords with a little bit more yield. Obviously, a little bit more risk as well. But we need everyone up the food chain to get along with that.

“We’ve always said the model needed a big shake-up because landlords were almost complacent. We’re the ones bearing all of the risk… and when the shit hits the fan, we’re the one that gets lumped with the bill.  And now that it’s all happened at the same time and the operators have all got lumped with the bills and all of the operators have then had to go back to the landlord and say, ‘hey, remember us? we’re going to the wall. Unless we, our biggest liability, figure out a way forward with you, there is no way forward.  We’re dead in the water. And it’s not even a negotiating position. It’s binary. Unless you help us, we’re gone.”

“I think what we’re going to see now is landlords with voids and landlords panicking. Because obviously, with voids, goes lack of rental income. And without rental income capital prices start to falter. And when capital prices start to falter, banks start looking at these investments you know, with a raised eyebrow.”

2020 looks like a pinch point for the coworking industry. Some coworking operators won’t survive the year, or will have to shrink, as their tenants pull out of the city. But in the coming years, when big corporates figure out their new plan, Lynch sees more demand for flexible spaces: 

“The coworking operators that can stay afloat will benefit from the opportunities that are going to come up in the market. Because we’re going to have higher supply with regards to voids, and landlords willing to do deals. And also, a shift in demand from traditional office space and traditional leases to a more flexible option.”

“I think sometimes you need to burn things to the ground in order to rebuild them for the future.  And I think this sums up our whole last three months of business — we’ve never been more ready to light that fire.”