For the majority, co-working still is a numbers game, no matter how much we want it to be about true added value.
10 months ago, after having followed the incredible growth of the co-working industry for almost a decade, a group of colleagues at 00 and I decided to set up SuperWork, a workspace-as-a-service company focused on creating and managing nurturing work environments that enable people to be and do their best at work.
Unlike the co-working spaces that we operate across London, SuperWork was never intended to be a landlord, but purely a delivery and management service. In theory, this would allow us to focus on creating the right conditions for people to flourish, instead of trying to squeeze an increasing number of people into less space, in order to make the finances stack up.
The initial interest in the model was overwhelmingly positive and created a real sense of momentum and possibility. We fine-tuned the product and a series of potential clients asked us for quotes. However, months later we still hadn’t landed a single client.
While the reasons were individual to each company, we saw two main reasons come up again and again:
- Ignorance is bliss (especially when it comes to the ridiculousness of London’s property market)
One of the main USPs of SuperWork is that we offer a complete estimate of costs per desk over a 5–10 year horizon. As we have over 10 years of workspace management experience we know approximately how much everything will cost — from design and fit-out to on-going operations, down to how much coffee people drink and how often the loo rolls need replacing.
This provides our clients with a helpful, but also scary, insight into just how much it costs to have your own office. Especially if you’re looking to locate yourself in Central London. Sure, a quick property browse can tell you that most offices will cost you from £50.00 per square foot in Zone 1. But few know how many sq. ft. you need for a company of a certain size or how much it costs to design a new office.
Hence, when doing this exercise for our clients, we showed that, once everything was accounted for, a desk price of £500 per person/month over a 5 year period was the minimum that could realistically be achieved in a central London location. Of this, rent would make up a staggering 50–60% of the total cost, with our management fee being less than 10%.
This led some of our pipeline clients to put the office move on hold, giving us the feedback that although the breakdown of costs seemed fair and realistic, they simply hadn’t fathomed the scale of investment they’d need to make.
This sentiment was reinforced by some of our friends who had already moved into an office of their own, as they confirmed that they would never have made the move, had they known what they were getting themselves into and how much it would cost them in the end. Sometime ignorance really is bliss.
2. The Goliath that is WeWork.
A few months after we launched SuperWork, the Goliath that is WeWork launched HQ by WeWork, also a workspace management service. Still, we weren’t really worried about competition on this particular area, as SuperWork was aimed at optimising humans and not real estate, hence providing two fundamentally different products.
Instead, it was WeWork’s “traditional” workspace offer that provided the real competition. As we contacted companies across London, we were surprised to hear that many of them had been receiving incredible deals from WeWork, as low as £250 per desk/month for up to a year in their new sites in Farringdon and Moorgate. While these prices are obviously not sustainable in the long term, WeWork does have enough cash to burn to cut prices to the point of dumping in order to attract business to their newly developed sites. For a cash-strapped startup, cost does matter, and hence a couple of our pipeline clients also ended up moving into a WeWork instead.
It’s all about the bottom line.
Our learning over the last 10-ish months has been that no matter how much organisations want to be in their own space and create their own culture, it all comes down to the bottom line, especially for startups.
Due to its business model, SuperWork was not able to operate on a scale that provided the financial efficiencies that big co-working operators can provide. And especially in a property market like London, that matters.
In order to succeed in an aggressive co-working space market, SuperWork will need to radically overhaul its business model, rethink its audience and its value proposition. The founding team has moved on to work on other, exciting ventures while we mull this over. But we’d love to grab a coffee if you have any ideas or insights you’d like to share.
Until then — fail, fail again, fail better.
Onwards and upwards we go.