Twin Cities co-working spaces get new lease on life

Co-working offices have traditionally catered to solo entrepreneurs and individuals working for small organizations that do not need large, permanent office space.

But as teleworking during the coronavirus pandemic shifted work habits across Minnesota, the mix at Twin Cities co-working spaces has shifted. Many of the traditional clients have returned to these flexible work environments, but they are joined by a new wave of workers, including some employed by large corporations and free to work from anywhere.

"I don't think we'll ever going back to a time when corporate office were the primary space for teams to collaborate and connect," said Alex Steinman, co-founder and partner at the Coven, a co-working officer operator in the Twin Cities that caters to mostly women. "I think the future is co-working and we're seeing a lot of corporate organizations looking into co-working spaces as potential options for their employees."

That model is working for Qumu, a Minneapolis video-as-a-service company with 11 full-time workers in Minneapolis and 114 total. It closed all of its offices in fall 2020 and went fully remote.

But to facilitate ongoing in-person meetings post-pandemic, the company contracted with Fueled Collective in Minneapolis for on-demand space for in-person meetings. Jason Karp, the company's chief commercial officer, says Qumu uses the space about 14 times a month.

"We still consider Minneapolis our home base and feel it's necessary to provide a physical space for in-person collaboration," Karp said. "It's all about empowering our employees to work in the ways that best suits each individual."

Plus, it saves the cost of fixed leases and other real estate expenses, he said, and eliminating daily commutes gives employees more flexibility.

In 2019, nearly 190,000 people in Minnesota worked from home, according to census data. But the Minnesota Department of Employment and Economic Development estimates that number was 600,000 in January 2021 as telecommuting had become the norm because of the pandemic.

As companies consider back to office plans, many are looking at hybrid models. Co-working facilities say they are becoming part of the plan for some of the big corporations or for workers who want an office.

A July 2020 survey of Minnesota Chamber of Commerce members found 45% felt the pandemic would make remote work more permanent; 37% said it would lead to remote work being an option.

For some, co-working companies said, a flexible work space is ideal to strike a balance. And the memberships at co-working spaces can be more cost-effective compared to multiyear lease agreements.

As of the recent fourth quarter, the asking rent price for office space in the Minneapolis market was $27.63 per square foot, according to real estate service firm Cushman & Wakefield.

The Coven opened its first office in Minneapolis in 2018, and opened a 10,000-square-foot location in St. Paul's Blair Arcade six weeks before the pandemic caused buildings across the metro to close in 2020. Between March and July in 2020, both locations were closed.

The day after they closed their doors, though, Steinman and her team created a digital community. During lockdowns, the virtual hub allowed people to "stay connected" and offered programming around operating one's business, she said. The move led to the company doubling its membership in the next four months.

Between its Minneapolis and St. Paul offices and the digital option, the Coven is hovering around 1,000 members.

"With kids going back to school — and we serve everyone, but a lot of our members are women, non-binary and trans folks who are caregivers or parents — we saw a spike in people coming in wanting to get out of their houses," Steinman said.

Tech entrepreneur and investor Seth Peter in 2017 founded Twin Ignition Startup Garage, a co-working space in Minneapolis. The 6,000-square-foot space opened in December 2019 with a few tenants, but sat empty for most of 2020 because of COVID-19.

Now, the building is at capacity with an average of 50 people from various companies using the office on a daily basis, Peter said.

"A year ago at this time, people were coming into the office as little as they needed," Peter said. "We built up confidence with vaccinations and people were maybe just tired [of staying home]. There has been a steady build-up of people spending more time with others."

Members, even if it's for one day a week, want to "just to be able to get away here and there and be around like minded people," he said.

The co-working spaces have instituted safety rules to keep members safe. For example, the Coven and the Finnovation Lab, for example, both require masks and did before the city mandate. The Coven also requires proof of vaccination.

"I think we've actually maybe seen more people coming to our space because we are taking those extra precautions and people feel more safe in our space than in other spaces," Steinman said.

"We had people suspending memberships, not knowing when they'd come back with offices closed and kids learning remotely," she said.

To absorb the loss of membership revenue in 2020, Finnovation received two federal Paycheck Protection Program loans and renegotiated terms with the building's landlord, Rutledge said.

In 2021, activity inside the building and membership rebounded, and though membership hasn't returned to pre-pandemic levels, it's a vast improvement, Rutledge said. Of the company's 12 private office suites, nearly all are occupied.