29 November 2017 Startup 2018: The companies and issues to watch

Co-working spaces are saving under performing locations

Startup 2018: We Work has proven that co-working is big business. Now unlikely candidates – from banks to tube stations – are jumping in.

In the 1970s, Barclays bank on Chesterton Road in Cambridge employed 120 staff. By 2016, it employed seven. Banks around the UK told the same story: as business moved online, physical branches became ghost ships.

However, instead of closing the empty branch, in 2015 Barclays turned its excess space at Chesterton Road into a co-working ‘Eagle Lab’. Old carpets and smoke-stained ceiling tiles were ripped out, replaced with a sleek industrial work space where desks cost between £99 and £349 a month.

The scheme was so successful that Barclays even reopened a closed bank in Brighton to turn it into an Eagle Lab. There are currently 12 Labs around the UK; in a year Barclays aims to more than double that number to 30.

The new timeshare 

For large companies like banks and retailers locked into long leases with increasingly unprofitable physical properties, co-working partnerships make commercial sense. Closing stores, says head of Eagle Labs Benjamin Storey, generates bad publicity – but helping local businesses has the reverse effect.

There are whisperings that UK retailers will soon follow suit. In mid-2017, John Lewis was reported to be mulling a deal to put co-working spaces into its older stores with poor footfall. A decision will be made in early 2018.

In the US, it’s already past the pilot stage. In Boston, the stationary retailer Staples, which has closed more than 300 stores since 2014, has teamed up with Workbar to offer co-working spaces in-store for £122 a month.

Everywhere is an office 

Examples of similar flexible uses of space are expected to grow and grow.

Central London is home to almost 8m sq ft of flexible office space – an increase of 73% over the last eight years. Alongside the proliferation of polished co-working spaces from the likes of We Work, valued at £15bn in mid-2017, startups are increasingly willing to work out of unconventional, often temporary offices – examples of which are springing up in all corners.

‘A lot of offices have empty meeting rooms at night or a bank of desks they’re not using,’ says Andrew Cribb, co-founder of 3Space, an NGO that has been helping startups and charities find temporary office space since 2010.

Hospitable landlords   

Cribb says commercial landlords and property developers – who were once hostile to the idea of giving over their empty space for temporary use – are increasingly amenable: ‘They’re very much coming around to it.’ Property developers who leave buildings empty while they wait for planning permission – which can take years – are particularly good targets, as they have no use for the properties pending demolition on their sites.

Developers can also benefit from an 80% discount on business rates by working with charities like 3Space, and avoid the costs associated with safeguarding empty sites.

Camden Collective is a similar organisation backed by Camden Council, which has provided a succession of 19 co-working spaces to support startups across the borough. Its latest building is an old auction house beside Camden tube station owned by TfL; the transport operator has suggested it may be the first of several similar projects.

Open all hours

Several startups are also hoping to build businesses out of empty space – beginning with the hospitality sector. ‘There are about 200 restaurants in greater London that are only working during the evening period,’ says Kaniyet Rayev, founder of the flexible co-working scheme Haus.

Haus’ plan is to enter into partnerships with a network of evening venues, using them as co-working spaces in the daytime when they’d normally be empty. Rayev has one pilot already open in Hoxton; Sway, a bar that was previously closed until 4pm every day. Now, Rayev turns up every morning with tea, coffee and extra plug sockets and plays host to Haus’ 40-odd members. At £95 per month, it is the cheapest co-working space in London.

Rayev estimates he will need to be operating 10 or 15 venues before Haus is profitable. As it expands, he’ll face stiff competition. US-based Spacious, which currently operates a dozen restaurants and bars within co-working spaces in Manhattan and Brooklyn, has plans to expand to the UK. There are similar startups in cities such as Austin, Melbourne and Toronto.

While there’s no doubt that unconventional office options will continue to multiply next year, what remains to be seen is just how many workers these providers can lure away from the ever-expanding We Work.