Coworking vs. COVID-19: Spaces In Sofia See A Drop In Memberships But Expect A Post-Emergency Increase In Popularity

More than two million people around the world have worked from coworking spaces in 2019,  a number about 100 times higher than the 21, 000 in 2010, says a report by Statista. Before the coronavirus outbreak, the coworking experience was steadily on the rise worldwide not only for freelancers and startups but in some cases even for investors and larger companies looking to become a part of an innovative community. The Bulgarian capital city Sofia has not been an exception – ranked 19th in the 2019 edition of the European Coworking Hotspot Index by Cushman & Wakefield and having over 40 locations open doors in the past few years. Some of these hubs are dedicated to small business owners and tech teams, other to social entrepreneurs, third to creatives, with topics going all the way to commercialization of science-based innovation and mental health. 

However, the spread of COVID-19 has turned things upside down and made coworking operators completely rethink their operations and strategies. While some smaller spaces temporarily closed doors and others ceased their physical existence altogether, many remain open to their members for the time being.  Nonetheless, with people encouraged to work from home and avoid social gatherings, and the ongoing uncertainty in the air, it’s definitely a challenging time for coworking spaces.

So, we asked the people behind five of the largest co-working spaces in Sofia to share how the current situation is affecting their business, what measures they have taken to survive the storm, and what are the new offerings and business models they are considering in order to adapt to the new state of affairs.

Metodi Terziev, Managing Director at betahaus Sofia

Trending Topics: What effect is the coronavirus outbreak having on your coworking space? What’s the percentage of customers who have left to date and how is member behavior changing?

Metodi Terziev: The coworking industry around the globe is affected by COVID-19 and betahaus is not an exception. There are two major implications – memberships’ cancellations and how the usage of our services has changed. Currently, we have a 5% drop in customers and 10% in monthly desk subscriptions. Furthermore, the vast majority of our members work from home which has altered the way we operate, do events and provide certain additional services. On the other side, we are very fortunate of having such a great community as things are discussed in an open manner and everyone seems to care about the situation as a whole. It’s very difficult to make any predictions of how this behavior might change but I hope that the human element will prevail.

What business measures have you taken to adapt to the new situation? How has your customer retention strategy changed? How are you planning to ensure financial liquidity?

We have been through tough times before and have developed an “immunity” of some kind. Cost-optimization, cash flow management and leveraging on good relationships around payments are a must in a situation like this. Moreover,  we are providing a 25% discount on the monthly rent for everyone during the national emergency with the aim to soften the financial burden. Keeping liquidity is a huge topic and the only sustainable way to do it is by making sure that our members stay with us.

Have you introduced or are you planning to introduce any digital offerings to members of your community (e.g. virtual classes, workshops, events, etc.) or try new virtual-first business models?

Yes, we are introducing online community events and share useful information on how to best take advantage of the time spent at home via our weekly newsletter. The situation as a whole has driven us to think about new products and we have already started working on a few promising ones.

What do you think will be the long-term impact on your co-working business? How about the coworking market in general?

The current situation is the hardest test for any business model and value proposition on this planet. The ones who survive and manage to keep their clients will enjoy a great amount of success in the future. I truly believe that the value behind the coworking model will become clearer and even more appealing to everyone. People and companies will understand that when it comes to the future of work, it’s flexibility and social connectedness that matter the most. Therefore, I expect good times for everyone in the industry and wish them a lot of courage right now!  

Bozhidar Georgiev, CEO at Work&Share Coworking Space

Trending Topics: What effect is the coronavirus outbreak having on your coworking space? What’s the percentage of customers who have left to date and how is member behavior changing?

Bozhidar Georgiev: Obviously the coronavirus hit the coworking industry in a nasty way. Our customers are amazing and the majority of them are supporting us and are keeping their memberships, however, about 20% of your members were directly hit by the current virus outbreak and needed to cancel their memberships. 

What business measures have you taken to adapt to the new situation? How has your customer retention strategy changed? How are you planning to ensure financial liquidity?

Well, we are still open and working under very strict hygiene procedures. Some of our members still prefer to work from our space rather than from home so we have to provide for their safety. We have provided discounts for all of our members during the crisis so that we easen the financial burden on their side and simultaneously guarantee a certain amount of liquidity in order to continue to operate without any hiccups.

Have you introduced or are you planning to introduce any digital offerings to members of your community (e.g. virtual classes, workshops, events, etc.) or try new virtual-first business models?

Work&Share team is communicating with our community on a daily basis to figure out the current needs of the community. Already we have provided desks and chairs for some of our community members in order to facilitate their work-from-home lifestyle. We are partnering with amazing organizations like DevBG whose team is also a member in Work&Share which moved all their events online. Apart from that we work closely with CloudOffice to provide extensive G Suite support for our community.

I still believe that the charm of the coworking space lies within the physical contact with a person however we are transitioning very fast to virtual alternatives.

What do you think will be the long-term impact on your co-working business? How about the coworking market in general?

Genuinely, I believe coworking spaces will be able to prove themselves even more in the current market. The flexibility which we provide will be even in more demand after that nightmare is over. I expect an increase in demand after the lockdown is canceled. Companies will realize that their employees can work effectively from anywhere as long as the infrastructure is at top level and the employee is feeling cozy and comfortable. Hence companies would start to use much more the advantages of a coworking space and the benefits of joining such a community. 

Emil Shekerdzhiiski, Founder of Networking Premium

Trending Topics: What effect is the coronavirus outbreak having on your coworking space? What’s the percentage of customers who have left to date and how is member behavior changing?

Emil Shekerdzhiiski: The effect was quite immediate, once the quarantine was applied most of the companies ordered their employees to work from home, so did the freelancers and the coworking got empty.

So far about 20% of our customers left the coworking as a direct or indirect effect of the quarantine and the coronavirus. Some companies downgraded the offices and reduced the team sizes and either have moved to a smaller room or to coworking space.

What business measures have you taken to adapt to the new situation? How has your customer retention strategy changed? How are you planning to ensure financial liquidity?

As an immediate response, we have cut by half all of our member’s payments, we believe that now is the time for cutting costs for us so for our customers. This is the least we can do to still run the place and keep it open for all customers. There are still a minority of members working from the coworking and we didn’t want to close it. To allow that we have cut our employee’s attendance to the minimum and closed some of the areas to maintain activity at minimal costs.

Have you introduced or are you planning to introduce any digital offerings to members of your community (e.g. virtual classes, workshops, events, etc.) or try new virtual-first business models?

As a second response, we have operated an online “virtual coworking”, opening zoom rooms inspired by the real coworking areas: The kitchen area, The smoking rooftop terrace, main coworking area, etc each with different guidelines and online atmosphere.

We wanted to give our customers, mostly the self-employed, a social feeling of still being part of a group and community working together. 

What do you think will be the long-term impact on your co-working business? How about the coworking market in general?

We expect the coworking business to experience a positive effect in matters of occupancy and type of customers. This since we believe that traditional office spaces with non-flexible terms will become less popular, mainly due to cost efficiency, changes in team sizes and out of office work.

Also, we believe companies will allow partial work from home or as an alternative, work from a place of choice, where coworking might be one of the first choices of employees looking to diversify the regular working space or home environment.

Thibaut Taittinger, Founder of Puzl Coworking

Trending Topics: What effect is the coronavirus outbreak having on your coworking space? What’s the percentage of customers who have left to date and how is their behavior changing?

Thibaut Taittinger: After their notice periods are passed, we will have 10% of our members leaving in addition to another 5% downsizing their teams. This is an expected impact as coworkings are here to provide flexibility. On the bright side, we are also beginning to receive sales enquiries and reservations for the post-state of emergency.

We believe that the crisis is strengthening us as a community, even if it is, of course still too early to understand its full effects. The current period is truly unique in modern history; all of us are suffering, yet we are staying together.

What business measures have you taken to adapt to the new situation? How has your customer retention strategy changed? How are you planning to ensure financial liquidity?

In terms of measures, we have followed the same course as every other coworking – increasing cleaning and hygiene in addition to offering discounts to our members.

Relative to financial liquidity, we defined from day one how much COVID was going to financially impact us, accepted the cost and made sure we’ll be able to weather it without losing our team. We have sufficient cash reserves to sustain COVID and in addition to this, the team of Puzl has gone to a 4-working day week from 1st of April.

Have you introduced or are you planning to introduce any digital offerings to members of your community (e.g. virtual classes, workshops, events, etc.) or try new virtual-first business models?

Yes, we are introducing online initiatives both to the founders and CEO’s from our community, but also to our broader members, as each group is having different problems and needs during this period.

A lot of content, classes, workshops, and events are being created out there. So instead of reinventing the wheel and making our own, we are spending time researching and compiling the best ones we come across and share back to our members. If you think about it, suddenly we can all plug into online conferences and listen to the brightest minds out there without being confined to whom we can attract to Bulgaria – I would say this is one of the bright sides of COVID-19.

What do you think will be the long-term impact on your co-working business? How about the coworking market in general?

We believe that the coworking business is going to be positively impacted by the recession to come. In times of uncertainty, the flexible rental model of coworkings is better adapted to the needs of businesses. Yet at the same time, we also expect an indirect pressure on the coworking margins from lowering rental prices of Class A buildings.

How are your expansion plans affected?

For now, we’re are delaying rather than canceling. We still plan to begin the renovation of another 200 seats in Sofia. Besides this, we are still willing and able to close our 1,500 seats purchase in Budapest, even if again, we agreed with the current owners to delay the purchase.

At the moment we are working hard to get the visibility needed to make such investment by creating stress scenarios in order to define investment trigger points. In addition to this, we believe that with every crisis comes opportunities, so we are keeping our eyes and ears open for those, ready to discuss with people who may need help.

Boyko Iaramov, Co-founder and CEO, Campus X

Trending Topics: What effect is the coronavirus outbreak having on your coworking space? What business measures have you taken to adapt to the new situation?

Boyko Iaramov: We’ve been closely monitoring the coronavirus global spread since the beginning of the year. Our team put in place an action plan and rigorous measures to keep the Campus X community safe, long before the government declared a national state of emergency. 

Our main priorities were to first and foremost provide a safe environment for our members and then help the companies get through these turbulent times. We didn’t establish Campus X because we were attracted to the coworking or office lease business. We did it to create an ecosystem that helps tech companies be more successful, without having to walk the long and thorny trial-and-error path, we experienced with Telerik. 

In such difficult times, standing together is more crucial than ever. Together with the other founders of Campus X, we believe that for everyone to manage the economic impact, we must all share the burden. Thus, we introduced a substantial financial waiver to all our members, helping them mitigate some of the negative impact of the current situation. We are also exploring other financial levers and creative approaches to further help the companies. 

The health of our members is our key priority. To keep them safe, we instilled a set of preventative measures way before the first coronavirus cases were confirmed in Bulgaria and then augmented them. For example, we quadrupled the coverage of cleaning and disinfection, encouraged prompt reporting on trips and flu-like symptoms within the community, provided seamless tech experience for remote work, limited at first and then stopped entirely public events and social gatherings, switched to contactless payments and restricted people with flu-like symptoms from working/entering the Campus.

Campus X continues to be operational to date – strictly following the global recommendations and additional preventative measures to keep our community safe. Currently, our team is hard at work to support all members and their businesses’ continuity. The team’s efforts include timely communication about the coronavirus and protective measures, on-going tech support, online social activities aimed to tackle the gloom and doom national news. In addition, our members can benefit from the Professional Assistants Services we offer and have their car’s essential maintenance taken care of, without them leaving their homes, so they stay safe. Last but not least important, we share the lessons learned back at Telerik and in particular from the last economic crisis, so our members are better prepared today. 

As next steps, we will continue to be 100% focused on keeping our members safe and supporting their businesses continuity. We are exploring various plausible outcomes of the current situation and planning accordingly. Here’s one such example – to help the individuals who find working from home hard or less productive and seek an escape to focus, we’re introducing a new flexible plan (starting at 5 days/€50). It gives them the opportunity to work from one of our 3 specially repurposed private offices, allowing for 2+ meters distance between members and compliant with all health and safety regulations. This way, people looking for a temporary solution will have access to a serviced office space with enterprise-level Internet connectivity and no long-term lease commitment. 

Around the world

According to a survey by Coworker.com, a global platform for coworking space booking, 72% of spaces said they have seen a significant decrease in the number of people working from their space since the beginning of the coronavirus outbreak. 35% of coworking spaces report membership cancellations and 67% say to have witnessed a decline in the number of new membership inquiries.

Source: Coworker.com