Twin Cities co-working spaces to redefine shared offices as they prepare for workers

Jamie Rissi's wish that she would soon be able to see the smiling faces of her co-working members came true last week when Gov. Tim Walz announced he would allow Minnesota's stricter stay-at-home order to expire Monday.

"The biggest thing that we are getting from our members is just that we want to see your face," said Rissi, operations manager of St. Paul co-working office Wellworth.

Co-working providers have faced dwindling membership numbers as their spaces remained mostly empty or closed completely. The threat of COVID-19 and the mandate to distance from people has kept workers away from offices in general, and for co-working offices, which rely on short-term memberships, that has meant a steep drop in business.

Despite the setbacks, co-working companies remain optimistic their business model is well positioned in the long term to address the needs of remote workers.

While Wellworth's members have had access to the workspace, which sits on the top floor of the 428 building in downtown St. Paul, the office has been mostly closed. Wellworth plans to reopen Monday at 50% capacity, or about 50 people.

Membership fees, which are mostly paid monthly, have been frozen. Staff has removed some chairs, installed floor decals to signify distancing and put X's on some desks with tape to encourage people to spread out. Visitors will remain limited to the lobby or conference rooms. Rissi and one other manager will handle most of the daily cleaning duties.

"It's going to be a big task, and we are up for it just to get our community back," she said.

Over the past decade, co-working has become a popular workplace option in the Twin Cities and across the country as the acceptance of working in shared space has become more normal. Flexible office space or co-working space allows for short-term memberships where amenities like lounges, conference rooms and kitchen areas as well as often desks are shared among workers.

In 2010, there was 9.5 million square feet of flexible office space in the United States, but by the end of last year flexible office space or co-working space grew to nearly 85 million square feet, according to a report by commercial real estate services firm CBRE.

In the Twin Cities, flexible office space has continued to climb, though as of mid-2019 it still made up less than 2% of overall office space. There's about 60 flexible office space or co-working offices throughout the metro with almost a third of space located in downtown Minneapolis, according to CBRE.

For the co-working outgrowth of Chanhassen-based fitness company Life Time, 2020 was supposed to be a big year. Life Time Work, which currently has four locations (two in the Twin Cities), had planned six office openings slated across the country this year. Those projects, including plans to open an office in the former YMCA building in downtown Minneapolis this fall, have been delayed.

"It's going to be a real hit to our business," said James O'Reilly, president of Life Time Work.

Many members have opted to not return to their co-working offices yet, though Life Time Work will be ready when they decide to return with reduced shared seating, temperature checks for staff and disposable desk pads made out of thick paper for workers to put over their desks among other features, O'Reilly said. About 75% of Life Time Work's offices are dedicated spaces for one worker or set of workers with desks averaging 3 feet by 6 feet in size, which allows for more social distancing, he said.

Despite the current losses, O'Reilly said he believed the popularity of working from home will push people to continue to turn to supplemental workspaces like co-working offices. For Life Time Work, which has more suburban locations, the benefit could be even greater as people may want to work closer to home and avoid the big cities, O'Reilly said.

"I think co-working space will continue to be relevant especially during this time when we are feeling more isolated," he said.

Homegrown collaborative space Fueled Collective, first known as CoCo, has offered limited access to its four spaces since mid April. Although co-founder and CEO Kyle Coolbroth admits his industry has been "hit hard" as a business by COVID-19, he sees a light on the horizon.

"I see more need in the future than I see less need," he said.

Stefani Pennaz, Fueled Collective's business development manager, said she thinks the company and other providers' offerings will evolve to have more dedicated spaces with more short-term rental offerings like daily or weekly reservations.

Amid the industry growth, there have been missteps. Last year, co-coworking giant WeWork ousted its CEO and had to be taken over by its major investor SoftBank Group and lay off thousands. More layoffs have been reported in recent weeks.

WeWork has kept its three Minneapolis locations open throughout the pandemic, though they have de-densified heavy traffic areas, stepped up cleaning and limited amenities like drink services. WeWork leaders have been optimistic about the future, with WeWork CEO Sandeep Mathrani recently interviewed saying the company's larger "enterprise clients" are seeking more space to make sure distancing is possible.

"The key to WeWork is flexibility," he told CNBC.

Rissi, who was in her Wellworth co-working office late last week to prepare for its reopening, reiterated that while the flexible office industry may be currently suffering, she was hopeful for a long-term turnaround.

"I think this is going to be a short-term pain for a long-term gain," she said. " ... I think co-working is going to save the day."