• Friday, March 29, 2024
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Worries as COVID-19 impact on real estate changes coworking growth story

real estate

With 72 percent decline in the number of users and 67 percent drop in new membership enquiries, both within the first half of 2020, investors in coworking space market are worried over its changing story.

Coworking has been one of the high growth areas in Nigeria’s real estate market. The growth was driven largely by the emergence of startups and the migration away from costly office spaces.

When it started in the US in 2005, it was not much to reckon with but today it has grown to about 30,000 coworking spaces globally with an estimated 1.18 million users.

Africa’s large millennial population, according to a new report by Northcourt on Nigeria’s real estate market, contributed to the growth of coworking on the continent and recorded more than 600 coworking spaces with Nigeria ranking highest.

But this story has changed. “On March 20, this year, one of the country’s pioneer coworking spaces, CCHub, suspended activities until further notice. LeadSpace also announced that its hubs would be closed due to social distancing restrictions. Globally, it’s been the same story,” Ayo Ibaru, chief operating officer at Northcourt, confirmed.

Ibaru noted that tenants are unable to use, and consequently, pay for space, advising that investors in this space need to significantly adjust their business model and implement measures to continue business as working from the office (WFO) has quickly switched to Work From Home (WFH).

The effect of this is that the use of office space has reduced with some corporate head offices mandating that as much of 90 percent of their staff work from home. This will influence future demand.

“The introduction of hygiene protocols is now mandatory. Coworking has been crippled by social distancing rules adopted to curtail the spread of COVID-19. Lagos, with the largest concentration of coworking spaces in Nigeria (over 60%) and a leading part of Nigeria’s coworking sector, is estimated to have lost N300 million in revenue as of March 2020,” Ibaru noted.

To survive, he said, coworking spaces will need to pivot. More people will want to work from home, mid to long-term. Digital networking events are already taking the place of physical meetings and focus is shifting to providing more support for members over the standard space and physical resources.

As the world conforms to the new conditions for doing business, analysts see coworking spaces facing challenging seasons ahead. Corporate Nigeria has kicked the execution of remote working strategies into high gear with some head office complexes emptied of some of their staff.

It is hoped, however, that as large organisations optimise their operations post-COVID, coworking spaces will serve as a welcome alternative. The adoption of remote working post-pandemic is likely to increase, encouraging work from close-to-home coworking spaces where residences are not conducive enough.

Ibaru advised further that coworking space investors would need to attract and keep larger, more established clients looking to optimize administrative costs, adding that companies will set up a more distributed workforce to better manage employees working from different locations.