COVID-19 disruptions have business owners reassessing everything from the products they offer to the buildings they use.

And the coworking space industry faces its own reckoning: With safety and social distancing front of mind, it’s tough to navigate a business model that usually sees clients cycling through desks and working shoulder to shoulder in communal spaces.

Around the Springs, though, coworking centers say the pandemic is also creating opportunities to attract new clients.

The Business Journal spoke with Frank Frey, general manager of Epicentral Coworking, Cory Lyle, co-owner and manager of OC-Central in Old Colorado City, and Andrew Woehle, president of the 365 Grand Club, about how flexible office spaces are weathering the storm and positioning themselves for success after the pandemic. 

EPICENTRAL COWORKING

Epicentral’s Frank Frey said the business operates on a membership model, offering open work stations, dedicated desks and private offices along with access to phone booths, high-speed internet, printing services, a shared kitchen and other amenities.

But the business’ mission, he said, is “to create community through coworking.”

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Frank Frey, general manager of Epicentral Coworking downtown, has seen members returning as businesses reopen.

“Really what we want to do is provide a place that people can go where they can feel connected and plugged in to the overall freelance community or entrepreneurial community,” Frey said,“which, in light of what’s happening, that piece is really hard to maintain.”

The business reopened in early May after the state’s stay-at-home order expired, and has had to adhere to local and state guidelines on social distancing and capacity limitations.

They’ve also had to limit or disallow the use of some shared spaces, which restricts interactions and collaboration between members.

“We’re still able to fulfill our function as a coworking space, but that community piece is kind of what’s lacking,” Frey said.

“But we’re still able to operate. We still have enough revenue that we can squeeze by.”

Monthly rentals of private offices — the largest revenue generator for the business — have stayed strong during the pandemic, but Frey said many members who use open work stations have been slow to return.

As a result, Epicentral generated only about half of its typical revenue in May, and about 75 percent of its typical revenue so far in in June.

But Frey said the revenue decline is, at least for the moment, sustainable. And with new capacity limits, he said Epicentral is fortunate not all of its members returned on Day 1.

“Luckily not everyone wanted to come back at the same time so we were able to kind of ramp up our opening,” Frey said.

“That way we could make sure that members who wanted to return would have a space.”

If all of its members decide to return to Epicentral in the near future, Frey said they’d probably need to switch to a reservation system to accommodate them while adhering to guidelines.

He anticipates members will gradually return, and that with so many businesses considering changes to their models, coworking centers will likely see an uptick in new clients.

“I don’t think we’ve reached the boom yet,” Frey said. “We’ve recently given several tours to companies that are brick-and-mortar but are dissolving that … because they’ve learned that remote working does work.

“So now they might be able to dissolve and get rid of that lease, especially in a time where their company probably struggled and they had a loss of revenue. If you can get rid of one of your largest line items, why wouldn’t you?”

But companies dissolving their traditional office spaces, Frey said, could also lead to more competition.

“On the flip side of that, there’s folks who are locked into long-term leases and they might not have their full workforce return,” Frey said. “So maybe they had to lay off some people and may not hire them back, so they’re left with extra square footage. Which means they may try to do a coworking model themselves. So there might be more demand, but there also might be more supply at the end of all this.”

OC-CENTRAL WORKSPACE

OC-Central is an Old Colorado City development that will soon be home to retail shops, a CrossFit gym and a brew house.

The office workspace at OC-Central came online in March just days before the COVID-19 shutdown. A grand opening was planned for April, but was never able to take place.

Cory Lyle, co-owner and manager of OC-Central, said the workspace features 30, one-room offices and is not a traditional coworking business, but does have shared spaces its tenants may use.

The shared spaces are not available to rent and are meant to be free amenities for the workspace, which Lyle said cuts down on staff overhead and allows them to rent their offices for less money.

Because the shared areas are not part of the business’ profit model, Lyle said there’s been no need to change operations, but the pandemic has prompted them to alter their marketing.

“We basically took ‘coworking’ off of our marketing information and emphasized the single-room offices,” Lyle said.

“I don’t think people who go into the space are seeing it as a huge loss. They haven’t lost any services because there were no services associated with it to begin with. We never intended to really profit from it, but wanted to make it an amenity to attract more single-room office renters.”

Before the pandemic, the workspace had only acquired one tenant. They were able to sign another shortly thereafter.

But since businesses have been slowly reopening, Lyle said the workspace has seen a surge in new tenants. They’ve leased five offices in recent weeks.

And the types of tenants who are either leasing or inquiring about the office spaces are quite different from the tenants they’d originally envisioned.

“Rather than getting people who are entering into the office market, we’re getting some people who are downsizing,” Lyle said. “I was looking at this a couple of months ago as kind of a business incubator. Now I’m looking at it as — instead of housing a lot of startup initiatives … it’s housing perhaps some users that are retooling or refocusing their operations and trying to have a smaller office footprint.

“So I do think the market is going to see a lot more people downsizing as opposed to people just coming in to start their operations and then eventually upsizing.”

365 GRAND CLUB

The 365 Grand Club’s membership includes access to gyms, pools, hot tubs and other perks. An upgrade package gives entrepreneurial members access to its virtual office above The Famous steakhouse downtown.

Andrew Woehle, who runs the 365 Grand Club and several properties for the club’s owner, Perry Sanders, said the $60 per month virtual office upgrade gives members a unique mailing address and access to the office’s conference rooms, kitchen, common area, member networking events and “the fastest internet in downtown Colorado Springs.”

Woehle said some of the other properties he manages for Sanders and 365 Grand Club Properties are office buildings, and that many of their tenants are choosing not to renew their leases or are evaluating other options for when their leases end.

But because there’s a low inventory of office space downtown, he said he’s confident those traditional offices will “come back with a vengeance” and fill up quickly.

“We’re not pushing the virtual space because we own office spaces and we have tenants — but if you’re in the startup business or you can’t afford office space, we kind of have the perfect virtual setup,” Woehle said.

“So let’s say you went out of business or you file bankruptcy, but you’re trying to restructure because of the pandemic, which a lot of people have. A lot of people like that would really benefit from a virtual office space.”

Woehle said with more employers now allowing their staff to work remotely, many employees will likely seek to split their time between home and a virtual space to avoid burnout working from home.

“I think you’re going to see a lot of people that can work from home that are going to work half from home and half from a virtual office space. We’re seeing a lot of that,” Woehle said.

“So I think because of supply and demand [of available office space] and the mindset of the future, you’re going to see more virtual offices popping up around the country and around the Springs.”

Since downtown is currently booming with new development, Woehle said he thinks the cost of rent is likely to increase and that some young entrepreneurs will be priced out of the market in acquiring a permanent office space in the area.

“Virtual office space is going to be the only thing they can afford,” Woehle said.

“The average student out of college or the average person getting started is going to have to be more in a virtual setting until they can afford brick-and-mortar.”

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