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With Rising Rents Come More Virtual Offices and Co-Working Spaces

Young companies and start-ups typically don't have the cash to rent an office, leading to the rise of co-work and virtual work spaces.

Where there's a start-up community, chances are high that real estate prices are close behind. In cities like Boulder, Coloardo, and San Francisco—cities that rank in the top 10 in U.S. regions with the highest ratio of tech start-ups—commercial rent prices can prove a financial obstacle to would-be small businesses.


To get around the prices, cash-strapped entrepreneurs are turning to virtual and co-work spaces to get their businesses off the ground.

“Headphones are the new cubicle,” Duncan Logan, founder of RocketSpace, said in The New York Times. Logan started his San Francisco-based office rental company in 2010, turning over a neglected office building into a shared work space. There, some 580 young companies work side-by-side at long tables, using the office for its centralized location within the city's tech hub and its high-speed Internet access (not to mention the free beer).

And it's not just the U.S. In Hong Kong, where start-ups are rapidly emerging and butting heads with real estate prices, an industry of "more than 10 companies operating from 30 locations containing hundreds of thousands of square feet of flexible, short term office space," has taken root, writes Joshua Steimle, owner of an online marketing firm based in Salt Lake City and a contributor to Forbes.

Started by local entrepreneur Jonathan Buford, the co-work/virtual space model in Hong Kong offers the bare essentials to entrepreneurs at a fraction of the cost of a traditional office space. “But that's just fine with entrepreneurs who only want to pay for what they need,” writes Steimle.

And when it's time for expansion, trends suggest that moving into a physical space may be a move against the grain. According to a study from Telework Research Network, 30 million Americans work from a home office at least once a week. In the next five years, that number is expected to increase another 65 percent. And people are reporting they're happier that way.

Moreover, working from home at least half the time “accounts for savings of more than $10,000 per employee per year... [and] employees save somewhere between $1,600 to $6,800 and 15 days of times once used driving to work or taking public transportation,” according to Forbes.

But what about collaboration? The kind of spontaneous, creative sessions that can prove crucial to a business's success? With teleworking technology growing more sophisticated (check out this list of online collaboration tools), physical collaboration has been ceding ground to the border-less online community.

Dawne Lane, who runs her small business, Virtual Business in a Box, from her stone cottage in Cornwall, England, is reliant on online collaboration and wouldn't have it any other way. Writes Lane for the Guardian: “My team of three other associates, all of whom also run their own home-based businesses, are geographically separated across Devon and Cornwall but we are able to work together through the use of super-fast broadband and the latest technology such as webinars, cloud-based storage, Skype and video calling. This is also means that we can work from almost anywhere and I have been known to be in touch with them and clients while on a beach in Egypt!”

Physical spaces are becoming less relevant in today's small business and collaborative economies. So long as small businesses have the right tools, their commitment to the idea they hope to build will weigh more heavily than the top-floor office suite they can secure. Or, as Rob Bellmar, senior vice president of conferencing and collaboration at InterCall, puts it: “To be a leader today, success starts with making 'I'm going to work' a state of being rather than a physical destination. Empower staff by giving them the tools they need to break down whatever barriers stand in their way. Then you will be prepared to take advantage of the collaboration economy.”

Photo via (cc) Flickr user Will Keightely

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