A lively debate took place on March 14, 2019 at the Devonshire Club in Devonshire Square, London (1) – part of WeWork’s $800+ million development and HQ. I was proposing the motion: co-living and co-working, and private clubs are the future of hospitality – it is not a fad (seasonal fashion).
With an estimated global population of 10 billion people by 2050, of which seven billion will live in urbanised areas – an increase of 30 per cent on 2019 levels – creative solutions will be essential to relieve the pressure on cities, infrastructure and the way we will work in the future.
Residential rents are rising; in Berlin, for example, rents have increased by 100 per cent over the last ten years. In most cities, office rents per square metre, are increasing. Commuter times are becoming unsustainable; for example, in London the average commuter spends 2.5 hours per day travelling to and from work and, as a result, 50 per cent of UK workers would reject a new job with a commute of over 60 minutes. Therefore, for productivity and personal wellbeing to improve, companies will need to become more flexible.
Moreover, by 2022, two billion workers will be globally mobile, comprising 43 per cent of the global workforce; in the US alone, by 2027 over 50 per cent of the workforce will be freelance, versus permanent – the first time in industrialised history. These structural changes underpin the need for new real estate solutions. The workplace, as we know it today, is fundamentally changing.
The sharing economy – epitomised by products such as Airbnb, Uber, Homeaway, Lyft, Zipcar etc. – has highlighted the benefits of transforming assets into flexible serviced inventory, without the need for ownership. It therefore makes sense that this trend will also transform traditional models of office and home ownership. WeWork, the global co-working benchmark, is now the largest private office tenant and co-working now accounts for approximately 20 per cent of the allocation/take-up of new office space, up from seven per cent a few years ago (2).
The benefits of co-working are huge: investors still obtain longer term leases to secure investment returns; and companies obtain previously unavailable levels of flexibility in their real estate costs. In this new era of intense innovation and rapid digital transformation, this agility reduces risk by enabling companies to scale up, down, relocate, start-up, shut-down, temporarily relocate and have hubs in major cities as business requirements change. Crucially, it also allows their employees to have the flexibility to work from home and other locations. A “win-win” for employer and employee alike.
In the residential, and extended-stay hospitality sector, co-living is also gaining traction. The number of products and brands are increasing and significant investment is being channelled into this segment. For example, European co-living concept Quarters recently received $300 million from its parent company, to expand into the US market. Why such interest? Because the essential concept appeals to a much broader group of consumers.
US co-living operator Ollie, which focusses on young singles and couples, found that although 80 per cent of its tenants were millennials, a significant 20 per cent were empty nesters or over 50 years old, who wanted the same co-living community experience. Young families in New York can soon relocate to the first 1,800-unit co-living joint-venture development Kin, operated by Common and developed by Tishman Speyer, the USD 88bn owner-developer. It seems that there is a market for co-living products and services targeting every consumer socio-demographic and profile.
It therefore makes sense that communities and towns of the future can be co-living and co-working locations, where employees choose to base themselves, whereas cities/capitals remain the HQ and hub for key meetings and workshops. Benefits include: less pressure on urban infrastructure; lower urban population densities; reduced commuting time; positive sustainability impact; better quality of life and productivity; and lower costs for companies. What’s not to like?
Inevitably, there are hurdles to overcome. It requires companies to move from a command-and-control approach to a trust-based approach. As most of the successful ExOs (Exponential Growth Organisations – Google, Amazon, Facebook, etc.) know, their success has been based on leveraging the skills and experience of people from around the globe, wherever they may reside.
Some people in the traditional hospitality industry may think that co-living and co-working is just a fad (a seasonal fashion). This thinking is potentially dangerous and reminiscent of those who thought that Airbnb was not going to transform the hospitality industry; that OTAs were no threat; or that extended-stay demand and supply was just a US phenomenon. The extended-stay model is the fastest growing hospitality sector globally. Well-conceived extended-stay concepts, such as the recently launched Stay Kooook, which we – HoCoSo – co-created with our partner SV Group, plus Zoku, Locke, lyf, etc. with great communal spaces and activated local communities, are essentially part of this co-living movement.
Given the speed of change we are experiencing and that we will have a 30 per cent increase in our global population in the next 30 years with two billion technology-enabled young people entering our global workforce, I’m betting on the side that has embraced the sharing economy. It’s an opportunity for hospitality companies to utilise their best resources – their people – to provide a whole new range of services and experiences to support the co-living and co-working movement, rather than resist and ignore it.
There is, however, a catch. The hospitality products and concepts which will survive in the future are going to be those with unique localised experiences, combined with a tailor-made customer-focussed offering, which must evolve over time.
HoCoSo, which creates alternative hospitality concepts for the future, embraces this new era of the workplace, with a team located in Berlin, Amsterdam, London, Zurich and Beirut. Recruitment is based on the right attitude, skills and potential. Team members choose where they would like to work and live and the lifestyle they require.
(This article was written over a few weeks whilst working in London, Zurich, Berlin, Bulle & Glion (Switzerland), and finished at Jo&Joe Paris, Accor’s latest co-living concept with 5,000 square metres of communal space. Thank you to the HoCoSo team for collaborating on this article.)
(1) The debate was hosted by Andrew Harrington AHV Associates and Piers Brown, Serviced Apartment News. Proposers: Jonathan Humphries HoCoSo and Harry Harris SUSD. Opposers: Weldon Mather WM Consultancy
(2) Cushman & Wakefield, European Coworking Hotspot Index, April 2019
Jonathan Humphries is chairman and owner of Swiss-based HoCoSo, leading hospitality consulting for the serviced apartment and extended stay sector.
