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How Coworking Spaces Are Navigating Through the Coronavirus Crisis

St. Oberholz: A Berlin coworking space during the first phase of the corona crisis.

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(3) How coworking spaces are adapting their business models in the first phase of the crisis

In simple theory, an ideal market is characterised by an ongoing balance between supply and demand through prices. Shocks disrupt supply, demand or both and new prices lead to a new balance.

What’s different to other economic crises? In short, the current phase is characterised by

(a) an initial shock that is still an ongoing event 
(b) more state interventions than usual, especially on the supply side
(c) potential further and arbritary disruptions at short notice
(d) restrictions caused by the event (virus) won’t exist in the long term

(a) Earthquakes can initiate an economic crisis, a bankruptcy declaration can burst a bubble. Their impact is longer-lasting, but the initial event only lasted for a brief period. The initial event of the current crisis though, the social threat of the virus, is still ongoing. It is a natural disaster in progress. However, it will not nearly last as long as climate change, whilst its threatening impact does not seem to be as slow.

(b) For this reason, the situation has established a new, temporary pressing goal for most governments worldwide: reducing and eventually terminating the social threat that’s been created by the virus.

Though prices have never been the only regulation tool of a market, the current phase of the crisis is characterised by much stricter state interventions than usual. For example, when they prohibit a specific supply despite demand for it. 

This pandemic and the following government measures initially hit the supply abruptly. With the foreseeable loss of income and increased uncertainty, general demand has also collapsed. Some exceptions can be currently found in the basic needs’ market (i.e. food or safety).

The anomalous situation with further disruptions through short-term changes in the supply restrictions* is likely to persist as long as the aim is to avoid overburdening or reducing the burden on health systems and the social threat cannot otherwise be controlled.

The strain on capacity levels depends primarily on the number of newly infected people, acutely ill patients and the current virus reproduction rate (R0). For these reasons, the restrictions may vary considerably at a local, regional and national level.

In addition, many of those numbers still do not reflect the overall picture due to a limited number of tests. Since the risk of overburdening, knowledge about the virus and thus the measures can change several times in the coming weeks and months, you may have to readjust your business model repeatedly at short notice.

Anticipate temporarily arbitrary measures as a result of quick decisions, or restrictions that can even differ within the same industry. For example, restrictions may be placed on workspaces on the 20th floor that do not exist on the ground floor due to a limited use of lifts. 

In countries with a more liberal constitution, companies can try to change the measures by accelerated legal proceedings if legal restrictions threaten their freedom of business without a proper reason.

(d) The virus is likely here to stay, but not its social threat. The ultimate goal of most governments is to at least eliminate this threat. This means, apart from a few lessons that will be adopted, the economy will be hardly restrained by the virus in the long term. That is also another difference to climate change, which will shape our economy much more strongly in the long run.

Even if we do not know when, the potential social danger will disappear as soon as effective vaccinations or remedies are available in sufficient quantities. Similarly, the risk will decrease if herd immunity could be achieved or other, socially less harmful, therapeutic measures replace the current ones. 

If one of these conditions occurs, restrictions on the supply side would be unnecessary and should be lifted to a large extent. This would not end the crisis, but it would limit this phase and move us into a new one. Business models should anticipate this as well.

The immense lack of planning security is turning many investment decisions in this phase of the crisis into bets on future developments.

Accordingly, operators of coworking spaces are planning for the next few weeks in a correspondingly cautious but flexible manner, provided they can resume their operations. Among others, measures that have been rapidly implemented include:

- a greater distance between desk spaces being used
- temporary installation of plexiglass sheets as partitions, which can be removed again with minimal effort 
- a more frequent and thorough cleaning of the areas used
- new fabrics that can be cleaned more quickly and often, but still look warm and inviting, such as artificial leather
- switch from flexible to fixed desk workstations (if hygienic standards can't be otherwise ensured)
- temporary reduction of personnel-intensive services, e.g. by switching to key systems that require less staff (where this has not been done already)
- offering more online services such as online webinars or at-home memberships
- access ban for non-members (guests)
- automated flush toilets and sinks (that can also save water in future)
- sale of products that are currently in high demand, such as disinfectants and masks (just more stylishly packaged)
- out-of-house leasing of furniture that is currently not being used
- renovations of unused or closed spaces are currently popular as well

This incomplete yet indicative list of operators’ measures shows:

In this phase, measures are carried out that either require minimal investment and can be easily revoked or would not prevent further changes in the business models.

The negative impact of the macroeconomic revenue shortfall on the general demand for office or event space has generally not yet been fully reflected or taken into account, at least not in public. However, it is also currently not foreseeable to what extent temporary distancing rules will create a countertrend in the form of a higher demand for space.

▶︎ Next page: (4) Simple outlook

:::

(1) Securing income,
(2) Reducing expenses
(3) Adapting business models,
(4) Simple Outlook

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* In addition to the income loss, the demand has also been temporarily reshaped by the social threat, more oriented toward basic needs satisfaction.

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