LIMA — When workers left their offices in March 2020, with a global pandemic in full swing, nobody knew when they would be back. As firms and workers began warming to working from home weeks into lockdowns and confinement regimes, the real estate sector trembled at the prospect of a massive downturn in demand for office space.
In Latin America, use of corporate office space had already been changing before the pandemic, with the demand for shared offices taking off in 2015-2018. The U.S.-based firm WeWork was one of the beneficiaries. "We had 70% occupation levels before the pandemic," says Claudio Hidalgo, head of WeWork in Latin America.
Other brands joined the rush to profit off the interest in open-plan, attractive offices for shared use, with shared amenities. Real estate specialist Ricardo Cabrera says that "there was a boom in flexible spaces with the appearance of WeWork, which presented this as a novelty model through marketing," although he adds that "the idea wasn't new."
Future of the workplace
After a complicated few months in 2020 for low occupancy and canceled contracts, the industry has recovered, though with changes. This is a business "of fluxes and occupation," says Gabriel Bucher, Latin America head of HIT Cowork, an Argentine firm. He says most of the brands that catered to freelancers and small operators disappeared in the pandemic, "as the spaces emptied," leaving "very few players" today. HIT itself saw a 40% drop in the use of its premises in the pandemic.
Agustina Mortola, a consultant with realtors JLL, says flexible workspace firms now occupied 4.5% of top-grade office spaces in Latin America. A consolidation process was underway, she said, with the disappearance of numerous small brands, leaving big brands like IWG and WeWork ahead of others. As companies reconsider the coworking space amid changing work hours and continued uncertainty over how exactly people will be working, the big names in the field can expect opportunities.
Mortola says, "we're clearly seeing movement toward flexible offices in big corporations. In Latin America, high volatility in markets and limits on capital expenditures have made flexible office solutions even more attractive to the corporate user." Corporations, she said, were already using more shared workspaces in Latin America than elsewhere.
HIT has been expanding across the region
Maintaining an identity
For Álvaro Rocafort, regional head of the IWG group, coworking is not just about "the community" but offering "a better, and cheaper service" to business people. These, he said, can move into shared offices immediately, without costly refurbishments or "a forced 10-year contract. Clearly this makes the model attractive."
Claudio Hidalgo says that "right now, it's impossible to decide on signing for a physical space for 15 years, if you don't even know how many people will come back. That uncertainty kind of worked in our favor."
Coworking firms would like to operate a little like hotels
Office sharing was always attractive to tech firms and startups. Ubits, an online corporate training firm, has its employees in Colombia and Mexico working in WeWork premises. Beside the savings, the networking it allows can bring in work. The firm's HR chief Ricardo Fernández says "we closed [deals] with two clients we met through WeWork." Other types of businesses are finding this interesting.
Gran Torre Santiago, Costanera Center
The Costanera corporate complex in Santiago, Chile
Chile's tallest skyscraper
For some firms, though, especially with marked corporate or staff identities, mixing with workers with entirely different philosophies may not be a fit, says Lucas Luzzi of realtors Colliers International. Bucher disagrees, saying firms can, if they wish, impose their identities on a shared space. "Nubank is our client, and if you enter its offices you wouldn't know you're in a HIT. Our firm is operating, though, behind the scenes," he says.
Facing expansive prospects, some coworking firms like IWG are also exploring the franchise option. IWG may use franchisees to triple its presence in Colombia, and some, usefully, will be former coworking brands that went under in the pandemic.
Ricardo Cabrera says coworking firms would like to operate a little like hotels — managing a space for the building owner, and paying them a limited rent that is nevertheless assured. It is a profit-sharing model that has yet to attract building developers, given the cost of their investments and especially if economies pick up and overall rental demand rises.
But building owners have at least abandoned their distaste for coworking firms as tenants. Bucher cites the prestigious Costanera building in Santiago, Chile's tallest skyscraper. "It's very corporate... they used to tell us 'you don't fit in here and that's the end of it.' Now things have changed, and they're delighted we're there."