302. Experiments in Third Spaces

00:00:02,"Welcome to the Everything Coworking podcast, where every week I keep you updated on the latest trends and how-tos in Coworking. I owned and operated Coworking Spaces for eight years and then served as the executive director of the Global Workspace Association for five years. And today I work with hundreds of operators and community managers every month, allowing me to bring you thought provoking operator case studies and inspirational interviews with industry thought leaders to help you confidently stay on top of what's important and what you can apply to your own role in the Coworking industry."

00:00:44,"Welcome to the Everything Coworking podcast. This is your host, Jamie Russo. Thank you for joining me today. Glad to have you with me. We're gonna talk today about experimenting with third spaces, which is a bit of like just a thought starter theme that showed up for me at GCUC a couple of weeks ago, and I just wanted to kinda hash that out a little bit and give you some things to think about."

00:01:11,"And we're gonna talk about that, do a GCUC debrief with our Everything Coworking Academy members this week. We have all of our monthly live calls happening this week. It's a, the first week of the month is always crazy busy for the Everything Coworking team. We do our operator mastermind calls. We have our Community Manager live training. We are hosting a Google Review contest for our community managers this month."

00:01:38,"And we brought on two coaches for our Community Manager program to do kind of some extra things with a group. So they're running the contest. I'm doing some training on how to get Google reviews and stand out in a crowd and all the benefits that getting Google reviews and testimonials can have for your marketing. We're gonna do that on Wednesday, so lots going on over here."

00:02:01,"If you wanna join us, you can find more info on those programs under work with us on our website. Okay, so third spaces, I mentioned this in an email this week, if you're on our email list, you saw me make reference to this and someone responded and said, what's a third space? And I was like, oh, right."

00:02:19,"We talk a lot about Coworking. Not everybody talks about third spaces, so I don't have the Google response in front of me, but a third space is basically anywhere that's not home or what used to be work and maybe post pandemic, they need to actually kind of update that. So it can be like community spaces, parks, coffee shops, libraries,"

00:02:40,"you know, any place where you spend time where you might be doing work or might be, you know, looking for some sort of social connection that's not like a typical office space and it's not home. So it's, it's stuff that's in the middle. And I think we're gonna start to see a lot of innovation in this space because people are at home and are happy with the homeness of home for a lot of reasons,"

00:03:06,"except it is lonely, right? So I think that we're just gonna see a big shift in how operators are serving what members want. So members, we've got the typical members who have always been in Coworking spaces and sort of looked at Coworking spaces as a substitute for a typical office. And I just wonder if we're gonna start to see the trend change around what folks want for work."

00:03:33,"Of course, they need a place that is practical for doing work, right? If you need a recorded podcast, you need a nice background, you need good acoustics. Cannot sit in a coffee shop and do that, even if you like the vibe, if you have, I host a lot of calls for our membership. I'm doing a training program for Avis and Young,"

00:03:52,"which I mentioned last week. Can't do that, you know, in an open space or in a park or, or at the library, right? I need a very functional, certain type of space. I wanna look professional, I want a nice background, I need good lighting. So those things, you know, won't change for a lot of the context of what we're looking for."

00:04:13,"But I think that we're gonna see just this shift in sort of the vibe folks are looking for. We see a lot of Coworking spaces going after this sort of, you're at home, but it has all the things you need for work in it, or at least the common areas feel, you know, more homelike or more cafe like. I think I've mentioned on the podcast,"

00:04:34,"I joined a Coworking space that has a cafe in the front. And I love the vibe because I love the coffee shop sounds when I am, you know, need to be creative or even need to be productive. I just love like background noise for whatever reason, I find it to be like energizing, inspiring is not quite the word I would say."

00:04:54,"Maybe energizing, just like there's stuff going on around me, I'm thinking I'm motivated, I'm, you know, just sort of in a good vibe versus being at home where it's quiet and there are occasional really distracting things happening, like dogs barking. And I also think we love experience, so we love to go someplace. I was talking to Kane Wilmont,"

00:05:15,"he is my co-presenter developer for the course we're doing for Avis and Young. And so we talk a lot about our content, what we're delivering to the brokers, and we constantly update our content because the industry is changing all the time. I want to interrupt you for a minute with a special offer. If you are an operator that is getting ready to launch or your space is less than a year old and less than 200 members,"

00:05:43,"office r and d is piloting a program called Flex Startup program, which allows you to save 50% on your first year with office r and D Flex to help you grow your Coworking space. As many of you know, I run programs that help operators launch. I run mastermind programs for operators that are in business and a Community Manager program. And we have lots of members that love using r and d office r and d."

00:06:10,"It's kind of an all-in-one platform that has fantastic analytics, meeting room management, lots of integrations, all the things as I like to say. So it's a fan favorite of the Everything Coworking program members. So I'm excited that you get a chance to kind of get started with it at a discounted rate. So 50% off of your first year, you can learn more about the offer and sign up for a demo by going to Everything Coworking dot com slash nd."

00:06:46,"That's Everything Coworking dot com slash O N d. We'll also throw that link in the show note. So if you open your podcast app, you can grab the link right there. So we were talking about amenities in Coworking spaces and how meaningful those can be versus what a lot of people get at their traditional office, right? If you work for Facebook or Google,"

00:07:07,"sure, you've got a lot of fancy amenities. If you work for anybody else, you don't. And so, you know, he was putting in a photo, they have a location in Montreal that has an onsite barista and it's got this awesome very fun coffee bar. And I was like, I would sit at your coffee bar all day long and outside of the coffee bar or these awesome like booths and get your cappuccinos sit in the booth that you want,"

00:07:29,"if you want, or sit at the coffee bar. So it's like a coffee bar experience within the Coworking space. So you get a little, you know, the noise at the coffee bar a little bit, but you can also do work and pop into a conference room or a, you know, phone booth if you need to take a phone call."

00:07:43,"So just more of that vibe happening. And I think the other piece is that people may be looking for a place where they can do some work and do some socializing in a place that's not calling itself a workplace. So I think Coworking as a word, may start to be a little bit challenging. And somebody at the conference, I probably mentioned this last week,"

00:08:06,"was like, you should broaden down to third spaces. I was like, yes, I love that idea, but I don't think I changed my branding right now. If anybody has an opinion about that, let me know. But I, I am definitely the kind of person who would be a consumer of a work club if I had one in my neighborhood example,"

00:08:27,"my daughter goes to gymnastics for three hours on Tuesdays and Thursdays, and I know lots of you are in this boat, kids doing, you know, after school activities. Some of you have many children and you're running them around. I'm probably fortunate and that I only have one. And so when she's gone, I don't wanna sit at home. I usually earmark that time for work or volunteer work."

00:08:49,"So I do a lot of, I run our local soccer league, which I know I talk about a lot and there's a lot of work that I am always, you know, a lot of to-dos on the list. I don't wanna sit in my office and do that at night. I don't wanna sit in the same place that maybe I sat all day on Zoom calls."

00:09:05,"I want to be somewhere else, even though I have like stuff I still need to get done. So I would love a work club where I can go and have a glass of wine and sit and you know, get my stuff done. I don't need to be on Zoom calls at night, so I need to be able to bring my laptop, but I want no one to care,"

00:09:22,"you know, if I order food or what I do, I would love to be able to get snacks. So I would love food and beverage. I can't remember if I mentioned I went to the Hoxton, I'm trying to remember if I recorded after, I must have recorded after GCUC last week. I love the Hoxton. I cannot love the Hoxton anymore."

00:09:39,"That's in Chicago. Such a fabulous place. And that is like my dream spot. They're so welcoming of the external community. Giovanni and I interviewed Ian Minor who opened the Hoxton in Chicago about that model. So you can hear that story over on the Flexon Censored podcast. But I would love like mini Hoxton in my neighborhood and I wanna see my friends there."

00:10:04,"I wanna be able to have my soccer meetings there. We have our soccer meetings at the rec center, which is brand new and lovely, but sometimes I would love it to be like more of a social vibe and be able to ha, you know, have a glass of wine. Everybody can get a beer, we can order our pizza and hang out and just have a different vibe than what happens at the rec center,"

00:10:22,"which is a little more austere, I would say very new and awesome that we have access to that, but not as sort of warm, not the same experience. So I think we're gonna see demand for this different type of space that supports work and other things that people want in their life that they're not getting because they're working from home all the time."

00:10:47,"You know, that common thread I have with whenever I talk to folks like, you know, spouses at home, they're at home, they're not getting the social interaction they want. Maybe they know about Coworking, maybe they don't. How do we fulfill that need? So I think some of the questions that are marinating in my brain, and I bring this to you because you might not be thinking about opening a second location,"

00:11:08,"maybe you're thinking about you already have a space and you're expanding or you're thinking about the business model and you wanna do one of these unique models. I see this a lot in my Coworking, Startup, School. We have all sorts of folks with all sorts of ideas come through. And I will tell you in general, I get pretty anxious when people come through with a unique model."

00:11:28,"And I realized why this is the case in while I was having a conversation at GCUC and I was talking to Snay and I ha, now I have to go back and find her last name she owns from here. She's a co-founder. I'm not gonna be able to find her now. Okay. Anyway, I'll see if I can find her. If you were at GCUC,"

00:11:49,"probably know who I'm talking about. Anyway, hold on. She's on my LinkedIn. There she is. Snay, caia. I'm probably not saying it the right way from here. Your neighborhood workspace. So we talked and I am immediately very skeptical about small footprint co-working spaces that have mostly open space. It's very hard to turn a profit on those. It's very hard to provide a product that people want in open space because it's just not very practical for most end users."

00:12:19,"So you need to have a lot of offices and if you have a lot of open space, you need to be able to sell that inventory over a few times in order to make it really profitable. I'm not saying everybody is necessarily in it to be wildly profitable, but you know, we're looking for a 20 to 25% margin on this model. At a minimum it can be higher if you own the building,"

00:12:40,"you know, or have a good deal or depending on kind of what your real estate structure is and kind of how you're mentally accounting for leases or deals with a landlord or things like that. But if you're leasing, your operating margin would be 20 to 25%. It's hard to make that a very large number on a small footprint. So it depends on what your goals are."

00:13:01,"But when I have people come through the Startup school, I'm worried that they wanna pay their mortgage and that they're gonna open a small space or a space that is unique and varies from the model that we know works and they won't be able to pay their mortgage. So that's what's happening in my brain when I'm worried about you, when I encounter your unique model and get nervous on your behalf."

00:13:22,"But like many of you, I'm very excited by the innovation in this space. So when we see folks like Snay who are experimenting with this model on our behalf, then I get excited because she does not need that model to pay her mortgage yet. She's probably hoping that that will be the case at some point. But she's work, you know, she's experimenting,"

00:13:43,"she's learning about the model, she's doing a bunch of things that I think are working really well for her. She's got a cafe that's open to the public, which kicks off a lot of revenue. She does full space events. So she will book events that book out the entire space. She can move everything in her space, reconfigure the space. And so events are a big portion of her revenue."

00:14:06,"And then she has monthly recurring memberships as well as a lot of drop in traffic. And I think she's picked markets that just, she's been super lucky. They're outside of New York, they have a lot of residents that want a place to go and she's finding that demand. I do worry that it's not gonna replicate, but she is just really into experimenting."

00:14:26,"She's working on like shipping container offices and parking lots. She's doing a lot of things. She just wants workspace to be really accessible to lots of different folks. So I love that she's doing that. She's gonna figure some things out. I had lunch with some of our Everything Coworking Academy members and we talked about and some not like Jerome Chang I think was sitting there when we were talking about it."

00:14:48,"And Matt Irvin, who is not a current member, but we used to be, and hello Matt, if you're listening, it was great to catch up at GCUC and we were talking about some of the experimentation with smaller floor plates. How are people gonna make that work? Can they work when they're unstaffed and automated? You know, or you know,"

00:15:06,"they're just a barista or like what makes them compelling? You know, is there a segment of people who just wanna be able to drop in, they don't need somebody to be there. There's a cleaning crew that rolls through and you know, make sure it's clean. But what's compelling in there that, you know, makes that work? Or do you have to locate in markets where people just don't sort of care about human interaction and just need a place to work?"

00:15:27,"What's gonna make those work? I think we'll start to see some more experimentation, you know, with that. So again, the question I'm asking like what will happen in these third spaces? Will they have mul? Will they be really designed to be multifunction? Like what Snee is going after? Will they, you know, have food and beverage? I think that's a huge trend."

00:15:49,"Will they run events? I also, I think events is a great revenue generator if you wanna put up with the business model. And I said to today, you know what happens when you scale into other markets and you're not there and you're dealing with event staff, that has to be, you know, in and out on weekends. There are a lot of owners who want nothing to do with that,"

00:16:08,"even if it's a model that they really like. So that's tricky. Cause when I say events, we're talking birthday parties, we're talking baby showers, like not corporate events that are Monday through Friday, right? So just this huge variety of of events where, you know, who knows what might happen in this space. Hey, I just wanted to jump in really quickly before we continue with our discussion."

00:16:31,"If you're working on opening a Coworking space, I wanna invite you to join me for my free masterclass. Three behind the scene Secrets to Opening a Coworking Space. If you're working on opening a Coworking space, I wanna share the three decisions that I've seen successful operators make when they're creating their Coworking business. The masterclass is totally free, it's about an hour and includes some q and a."

00:16:55,"If you'd like to join me, you can register at Everything Coworking dot com slash masterclass. If you already have a Coworking space, I wanna make sure you know about Community Manager University Community Manager University is a training and development platform for community managers and it can be for owner operators. It has content training, resources, templates from day one to general manager."

00:17:22,"The platform includes many courses that cover the major buckets of the Community Manager role from community management, operations, sales and marketing, finance and leadership. The content is laid out in a graduated learning path, so the Community Manager can identify what content is most relevant to them depending on their experience and kind of jump in from there. We provide a live brand new training every single month for the the Community Manager group."

00:17:50,"We also host a live q and a call every single month so that the Community Manager can work through any challenges that they're having or opportunities get ideas from other community managers, build their own peer network. We also have a private Slack group for the group. So if you're interested in learning more, you can go to Everything Coworking dot com slash Community. Manager will demand sort of forced third space or Coworking spaces to innovate."

00:18:19,"Will people just kind of eventually at some point stop wanting the typical workspace that we're creating today that is profitable. It's got a really dense floor plate of offices, it's, you know, 10,000 square feet plus we know that that works really well. And you know, I think a lot, I've been thinking about our KPI session that I moderated and some of the discussions,"

00:18:45,"Sarah Traverse, who's the CEO of work bar, had a discussion on stage with Ryan Simin, who's the CEO of convene about margins and size of space and percent of open space versus private space. And there's some variation for sure on these models, but in general, you know, you're looking at a pretty dense space, although work bar is less dense,"

00:19:04,"but they know how to make up the revenue in larger floor plates, 20,000 square feet and then you know, you're really making great margins. So what does it look like when we deviate from that? How do we make up for those margins? Do you have to have a lot of those? And then how, you know, how do those get set up?"

00:19:21,"Because it's really hard to scale a lot of locations quickly. It's really hard to do. Operators say they wanna do it, it's hard to get those deals done and get those locations open quickly. It's mostly just hard to get the deals done. So we know sort of what those KPIs look like. I think we're still really learning, okay, what's the recipe?"

00:19:40,"Not that there's always a recipe for these unique models, but if we were gonna say start replicating social clubs, what does that recipe look like? What's the template for success? You know, how much food and beverage do you have to drive, you know, per square foot or how much event space, you know, how many events do you need to sell every month?"

00:19:59,"Or how many social memberships do you need to sell every month? And we're starting to see folks experiment with this. Certainly the Soho House has been around for a long time. So that's one example. Someone at GC mentioned to me, a group called Ground Floor Club in San Francisco. It has some workspace that doesn't have any offices. It's really focused on being a social club where again,"

00:20:23,"I think really probably more for an urban market where people are looking for things to join and other people with like interests. But I'm gonna put the link in the show notes if you wanna check it out. And then SNAs from here, I'm gonna link to that. Lots of folks on LinkedIn are talking about Collette Club, which I think is charging $125,000 a year for membership."

00:20:44,"So really high end office space in Manhattan. And I didn't read the full article. I think there are services that you get, but it's really for like this like super elite group of people. No judgment, not saying right or wrong, people are experimenting. And the discussion on LinkedIn was really like, will this work? They were gonna limit the number of memberships."

00:21:04,"So they've gotten mind like, we can sell them at this price. And so we only need a certain number of people. So I think that's really kind of the, the risk side of it is how much revenue do you have to drive from each sort of aspect of the business model. And that's not necessarily well proven. We don't have lots of examples of that,"

00:21:24,"right? The industrious model, I, I hate to use WeWork as as an example. Right now their stock is under a dollar, but they're struggling for different reasons. Not like the fundamental business model, which has been around for a long time. We just know what that looks like, right? If you do enough square footage and have enough density of offices,"

00:21:42,"generally you can generate a 20 to 25% operating margin. It's just less known when you diversify into a different type of model. Does this work? Does this work in your market? Does this work at a specific size? Does this work with the specific sort of offering and product mix? But I think consumers are gonna start to demand that we experiment with different models."

00:22:09,"And so just, I look forward to watching folks experiment. If you are experimenting and have some good insights to share, we'd love to have you on the show. Please reach out if you're thinking about working on this model, we'd love to have you in the Startup school. I do want you to come in not planning to pay your mortgage with this model until you know,"

00:22:30,"sort of how it's gonna turn out. So maybe keep your day job and experiment on the side or you know, get some investors who are interested in kind of funding these new models. I think I predict that we, maybe not in the next five years, but in the next 10 years, consumer demand will force us to shift away from strict workspace."

00:22:51,"And so I think if we stay really focused on meeting consumer demand and figuring out how to address that, we're gonna get there. So even great operators at Kane from IQ offices, we talked about him earlier with his onsite barista, he's doing that because he knows that's what his members want to experience and it makes him, makes IQ more competitive. They're also adding a food and beverage option so folks can,"

00:23:18,"you know, order in food and beverage more easily and in a more sort of elegant way than ordering DoorDash and having, you know, the Community Manager take, take the DoorDash order when it comes in, which probably most of you do at this point. So I think we're gonna start to see that experimentation, that demand happening and that experimentation happening. And then,"

00:23:39,"you know, we just need to figure out how do we all learn from those experiments so that we have some sort of templates and recipes that we know work. So love to hear from you if you could help with those recipes and templates and share with us as you are experimenting. So, okay, that's it for this week. Kind of a just a food for thought,"

00:23:56,"what's happening in the space just to kinda get your brain thinking. And we will see you next week. Thank you for listening to today's episode. If you like what you heard, tell a friend, hit that subscribe button and leave us a rating and review. It makes a huge difference in helping others like you find us. If you like to learn more about our education and coaching programs,"

00:24:23,"head over to Everything Coworking dot com. We'll see you next week."

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Jamie RussoMay 4, 2023Comment

302. Experiments in Third Spaces

302. Experiments in Third Spaces

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