Will Co-Working Spaces Replace the Traditional Office or Not?

The transition to remote and hybrid work models is forcing many businesses to rethink their use of office space...

Even when the COVID-19 pandemic is over, many employees will not be returning to the office. At least, not full-time. The transition to remote and hybrid work models is forcing many businesses to rethink their use of office space.

For some businesses, relying on a shared workspace rather than leasing a large office space makes more sense now. However, it is important to understand the risks and benefits of co-working spaces before making the switch.

Rising Popularity of Remote and Hybrid Work Models

Studies are finding that most employees want the flexibility of remote and/or hybrid work models to continue after the COVID-19 pandemic is over. In fact, some workers have reported that they would quit their jobs if forced to return to the office full-time.

According to media reports, approximately 58% of workers said they would “absolutely” look for a new position if they weren’t allowed to continue working remotely in their current position. Overall, a FlexJobs study found that 65% of employees want to work remotely full-time post-pandemic, and another 33% prefer a hybrid work arrangement of remote and in-office work, according to the survey. Only 2% would prefer to return to the traditional office on a full-time basis.

With fewer employees in the office, co-working is becoming more common, even among larger businesses. Sharing office space typically occurs in one of two ways. In one model, a primary tenant licenses portions of its leased premises to end user licensees. The license agreements set forth the terms for occupancy, including the occupancy fee and fees for various additional amenities, such as internet, front desk support, coffee service, and office supplies.

In another model, companies provide a multi-location network of shared office space. These chains, such as WeWork Companies, Inc., require users to enter into a membership agreement, with the membership fee determined by the level of service provided. For instance, low-cost memberships may only offer occasional access to office space, while members can pay more to have the same desk every day.

Risks and Benefits of Co-Working Spaces

For businesses, relying on co-working rather than leasing traditional office space can have significant benefits. The most notable benefit is the ability to have a fully-functional office at a fraction of the cost. Many work-share spaces also offer common areas and organized opportunities for members to socialize and network.

Flexibility is also a major benefit. The term of a traditional commercial lease is generally five to ten years. Meanwhile, a shared office license can be as short as three months, with the majority lasting one year with opportunities for renewal. Businesses and workers may also be able to rent office space on certain days of the week or a certain number of days per month.

Before transitioning to shared office space, it is important for businesses to recognize that they will lose some benefits of a traditional office. The most significant is privacy. Most co-working spaces are comprised of large, open rooms filled with many desks. So, if you don’t have access to a private office for phone calls, there is a risk that those around you will be privy to your conversations. Office equipment and network infrastructure is also often shared, which means you might have less control over its security.

With this in mind, it is important to consider the following before entering into a co-working agreement:

• Use of the space: Much like a standard commercial lease agreement, it is essential that the co-working license agreement clearly define who is entitled to use what space, i.e., what space is exclusive to the licensee and what space is shared with other occupants? Similarly, the agreement should also expressly state how costs of the shared space is allocated among occupants and who is responsible for any damage and/or repairs needed with respect to common areas.  
• IP and confidential data: If your business has nondisclosure agreements with business partners and clients, it is important to consider whether the innate “openness” of coworking space will pose issues. If so, an important question to ask is whether private office spaces are available for confidential phone calls, meetings, etc. If so, it is also a good idea to find out if the spaces are readily available or must be reserved in advance.
• Technology and data security: In addition to verifying that the technology services and hardware meet your needs, it is also important to verify that sharing office space will not significantly increase your risks of a data breach. One of the key questions to ask is who controls the network security and what protocols are in place to prevent unauthorized access. To provide added security, many companies that share office space often rely on a virtual private network (VPN) internet connection.
• Legal protections: Businesses should also determine who is liable in the event of a data breach. Given the lack of control over many aspects of your office space, it also important to ensure that you have sufficient liability insurance in place and a backup plan should the space become unavailable.

If you have questions, please contact us

When pursuing a co-working license, it is imperative to protect your legal rights. Prior to executing an agreement, we encourage all businesses to consult with an experienced attorney. If you have any questions or if you would like to discuss the matter further, please contact me, Lawrence Teijido, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.