As businesses grow, they hit tipping points in their office size. A startup can start in 200 square feet and grow to 3-5 people before stepping up to the next size, typically 1,000 square feet. When they move into this space, they waste space until they grow to fit the office. With co-working space, they could grow to a higher utilization level before incurring the additional rental cost. Consider a cost example of $2.00 a square foot where the rent goes from $400 to $2,000 in one step. Co-working space could allow that business to defer part of the cost increase for a year or more.
Imagine a future where businesses are defined by the quality of their employees and culture rather than their physical location. In this world, rural communities that invest in the local quality of life will have an advantage over metro locations. The co-working space movement represents an opportunity for smart communities, especially rural communities with a great quality of life. Northern Santa Barbara and San Luis Obispo Counties are perfectly positioned to leverage this movement. This article discusses the advantages and disadvantages of Co-Working in the tech industry.
COVID Changed Everything
The truth here is that the genie is out of the bottle, and critical workers want options as they seek to balance their personal and professional lives. The COVID pandemic forced businesses to offer remote work options proving that remote work was possible and efficient in jobs that had never been considered before. COVID advanced the adoption of remote work at a pace that nobody could have predicted. It was amazing how quickly remote work challenges were overcome.
One size does not fit all
Remote work is not a silver bullet that solves all problems, but it is a tool all businesses should consider. While a home office is the first image people have of remote work, the reality is that homes are not designed to be an office. Even high-end homes with separate dens lack the office culture creative thinkers need to get to the next level.
One item that comes up every time remote work is discussed is commute time savings. If the remote work is home-based, then commute time approaches zero. Co-working spaces save time, but it is not zero. Consider a common situation of a person that commutes to or from SLO to Santa Maria. This commute time is 1.5 hours per day. Using the IRS standard rate, the cost of this commute is $401 per month. Allowing the employee to work from home or a co-working space is like giving them a $2.32 per hour raise! Co-Working removes a commuter from the Hwy 101 corridor extending the life and reducing the maintenance of this infrastructure.
Home vs. Co-Working Space
Working from home is appealing to many people, but most homes were not designed for this. Homes without dedicated office space are especially problematic, and kitchen tables are not designed to be a desk. Add to this some neighborhoods with low-quality internet connections, and productivity can drop quickly.
Metropolitan Remote Work
When you compare office space costs from rural to metro, you see a big differential. For example, the average office space in Santa Maria is about $1.75 per square foot per month. In Silicon Valley, that cost is $5.64 over a 3x multiple. Office space costs pencil out to an annual rent savings of $4,668 per employee, equating to $2.44 per hour. Co-working space is difficult to cost on the same basis because of the shared spaces but using a 125 to 225 as a common range co-working space is a bargain at $1.60.
Remote Work in Rural Communities
Many technologists would rather not live in cities and enjoy the freedom to live where they want. Locally we have seen many remote tech offices led by a senior technologist who wanted to live here. Co-Working space gives rural communities the ability to compete for these jobs one at a time while bringing industry-leading businesses into our communities. Local examples over the years have included Amazon, iRobot, Adobe, Microsoft, GoDaddy, and more. We know these businesses allowed remote work for senior technologists because they have been speakers at Softec events. Not all of these stayed, but some grew from individuals to small teams and remained in our community. The key to this strategy is maintaining our high quality of life and effectively communicating that value to those who care.
Remote Work Costs Less
Considering the commute time, space costs, and benefit costs (30%), the annual savings is $12,871 between metro and rural work locations. Employers have to consider a wage premium of 25% for locations like Silicon Valley compared to Santa Maria. Assuming a base wage of $80k, this can add another $20k to the costs.
Office Growth Tipping Point
Nothing is perfect
Remote work is not for everyone. People who are not self-starters are a bad fit for remote work, and new people who have not yet acquired your company culture can be challenging. People who get their energy from others are a bad fit for work from home but might be fine in a co-working space. Not all people are the same, and maximum productivity might mean different office spaces for different people.
What all this means
It means that a co-working space could let your business can run leaner and meaner, but you need to understand the variables and find the right fit.