Written by Oscar Venhuis
Coworking: includes attempts to create environments that enable community, collaboration, engagement, facilitate the attraction and retention of talent, and contribute to personal and professional development.
Flex: includes attempts to design hyper-efficient floor plans and short-term leasing without the human-centered focus of the coworking model.
During a recent virtual roundtable session two definitions were suggested to describe the differences between the flex and the coworking model. They are distinct yet among industry insiders and the uninitiated there is prevalent confusion between the two.
The flex model
“Flex” is an abbreviation for flexible leasing which has its history with companies that were looking for leasing flexibility and a desire to decrease long-term financial obligation. The confusion about flex is understandable because they are also referred to as serviced offices, shared offices, managed offices, business centers, executive offices, or executive centers. These are all different terms for the same concept. Going forward I’ll simply refer to these as “flex”. When the flex model was introduced in the late 60’s in the US, it wasn’t uncommon to sign a 25-year fully insuring lease. Opening a new office was a considerable commitment, especially if your fit-out could take more than 10 to 20 years to amortise.
Operators using the flex model offer flexible lease and fully furnished workspaces. Monthly rental fees include building management fee, meeting rooms, office equipment, internet connection, cleaning, reception, security and utilities among other costs. This flex model of sharing space and resources is reducing the office set up and management costs. Accommodating provisional staff, a temporary office to test a new market, or as an interim space to cover the period between existing and new lease agreements are a few examples of flex tenants.
Coworking offers the same but different
The beginnings of coworking started in the 90’s. Some say it was started by a group of hackers in Berlin, Germany and some say it started in Silicon Valley, USA. Wherever and whoever conceived the idea and coined the term “coworking” first doesn’t matter. What is relevant is why coworking captured a share of the market. Conventional office floor plans and serviced offices were designed for privacy. Managers and above had their own private offices, the pantry was separated, and workers had their own cubicles. A perfect fit for isolated work and hierarchical organizational structures. Coworking changed all that.
The generation of the 80’s and beyond introduced a fresh attitude. Slacks for women in the office, unisex frangrances, sneakers with suits, and Madonna. They weren’t interested in rigidity but preferred playful openness. Hackers, creatives, and freethinkers were the first occupiers of coworking spaces. A new generation who rejected the established order and authoritarian ideologies. Coworking started from a need to be more authentic and a desire to be collaborative. Around the turn of the millennium, coworking went on a crazy expansion drive and flourished across the world. From 2010 every auntie, graduate, and private VC flush with money jumped on the coworking bandwagon. And then the big money arrived.
The trend to decrease the leasing period increased the liabilities of landlords which led to higher rent for the tenants. Coworking was a perfect alternative and opportunity for landlords to recover their liabilities and to maximize their rental income. At the beginning, coworking operators upgraded landlords’ derelict warehouses and grade B buildings with informal coffee-shop-like decors for lower rent. As the industry matured and started to attract larger corporate clients, coworking operators moved to grade A office towers in the city centers. An unavoidable race to the bottom began when the market was flooded with similar coworking spaces. According to Statista it went from 21,000 people working in coworking in 2010 to a predicted 2.26 million in 2020 – that is almost 128 times the number of people since 2010.
Tenants continued to demand lower rental prices and coworking operators were willing to undercut industry colleagues – foregoing profits to satisfy investors eager to conquer the market by blitzscaling with the goal of global domination. As pressure mounted to scale faster and faster, blitzscaling blitzed away communities as well.
The blurring of flex and coworking
Coworking offers all-inclusive office services as does the flex model, but the former is more attuned to the new generation of users. Years of relative stability had lulled flex offices into a false sense of security putting them into snooze mode. Coworking slammed the button hard and the flex operators jumped. They woke up a bit drowsy from a few years of napping, but then adapted rapidly to the new incumbent threat and today’s demands.
Flex refitted their new offices into similar hipster-cowork-like spaces and coworking quickly learned to increase the number of private offices. Today, hotdesking – a term used to describe users who don’t have a permanent desk in an open space – accounts for only a fraction of the total coworking floor space. With similar interiors and offerings between coworking and flex, these spaces started to attract similar company sizes – large and small teams, local and multinational businesses. This is where the similarities end.
Notable contrasts are the audiences and the intention of the operators’ model. Flex tenants are more established and typically operate in conventional industries that prefer more privacy and formality whereas coworking attracts businesses that were established in the Noughties targeting Gen Xers and millennials. They prefer more transparency and community. For businesses and professionals that are looking for an environment to have intended but spontaneous collaborations, coworking is the preferred choice. This brings us to the next and most fundamental distinction. The central idea of coworking is human-centric. The objective of coworking is to provide a psychologically safe environment by cultivating communities. Flex, on the other hand, concentrates on developing a safe physical work environment.
Last man standing
To succeed we often believe in the first mover advantage. This may be right if you look at exponential growth but not when we look at durability. I would argue that being last is the best. Apple, Facebook, and Google all came late to the game and have built formidable empires. They created the last best product in their class. It’s unlikely anyone can do better in their respective field unless an incumbent business with an entirely new disruptive idea comes along. So who’s going to be the last one standing in our respective industry of flex and coworking, those who focus on physical or psychological safety?
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