Is the Co-Working Bubble About to Burst?

The pioneering co-working company WeWork made headlines recently after it was named ‘potentially the most overvalued company in the world’. With the co-working trend only increasing in popularity, is there a bubble set to burst? Here, we explore the issue.

Why do people suspect a co-working bubble?

Over the last few years, co-working spaces have developed into a big business, with over a million people predicted to be using them during 2017. By far the biggest name of the co-working boom has been WeWork, who were among the first to lease work spaces to companies and individuals, and have since gone on to be valued at a staggering $16 billion – higher even than music-streaming service Spotify’s reported $13 billion.

However, WeWork’s valuation has been called into question by Scott Galloway, a marketing professor from The NYU Stern School of Business, who declared it to be ‘the most overvalued company in the world’. Galloway pointed out that WeWork’s current valuation works out as $550,000 per customer, and that individual floors being leased by WeWork were being valued at more than the worth of the entire building. Other voices sceptical of the valuation have pointed to the increasing competition among the co working market as factors that were not taken into consideration.

The accusation of companies valued far above their worth, based on speculation that may prove unfounded, has drawn comparisons to the dot-com bubble of the late 90s, which sank multiple companies and severely damaged many more – leading some to declare the existence of a co- working bubble ready to burst.

What does this mean for co-working?
However, it is important to point out that the belief of some in a co-working bubble remains purely speculative, and many have cast doubt on the idea – it has been argued that similarities between today’s startups and the companies that were hit the hardest by the dot-com bubble have been over-exaggerated. WeWork’s controversy stems as much from the unsustainability of its large-scale business model crashing against over-enthusiastic and speculative valuations, casting light on the gulf between its actual and perceived worth.

Compared to their larger-scale counterpart it seems likely to be smaller, independent co-working spaces that will be best suited to sustainable growth. Nimbler and more adaptable to change, many of these smaller spaces will also be helped by offering a clearer, more distinct service. In Silicon Valley, the Hacker Lab caters to tech creatives with workshops for members to design and build prototypes. Elsewhere The Brew, a co-working space in Shoreditch’s Tech City, counts among its locations The Coffice – a free workspace offering a café style environment that can be used by members and the wider local business community.

It is these spaces with a more dedicated, communicable focus that will find it easiest to continue growing – even if their larger rivals begin to stall, expect the innovative co-working spaces with a unique focus to be the ones that prosper.