Co-working spaces pop up in luxury gyms, suburban outposts as hybrid work becomes the norm
With downtown office vacancies at record highs and return-to-work mandates failing to catalyze the commute, co-working is making new inroads in Chicago, cropping up everywhere from suburban shopping centers and apartment buildings to a swanky health club in the city.
Somewhere between the spare bedroom and the centralized cubicle farm, employers and employees are finding common ground in the proliferation of co-working spaces in the post-pandemic hybrid landscape.
“We’re converting empty shops, we’re doing warehouses, we’re doing office buildings, we’re doing apartment blocks,” said Mark Dixon, founder and CEO of Switzerland-based IWG, the world’s largest provider of co-working space. “For us, it’s a period of super-high growth.”
A pre-pandemic boom that flooded the market with hip urban spaces exemplified by the stratospheric rise of WeWork, once the largest office tenant in Chicago, co-working — the flexible communal office favored by startups and entrepreneurs — took a beating after COVID-19 hit and workers stayed home.
But as hybrid working becomes the norm, co-working is evolving and expanding beyond the downtown offices that fueled its explosive pre-pandemic growth. A copier, coffee machine, conference rooms, free Wi-Fi and refuge from domestic distractions can motivate remote workers to come into the office — as long as it’s convenient, Dixon said.
“We’re opening more centers in downtown Chicago, but where they’re really opening is in the suburbs,” Dixon said. “The forced experimentation of COVID sort of proved that not everyone has to be in a centralized location.”
Founded in Brussels in 1989, publicly traded IWG has about 4,000 locations in more than 120 countries, including about 1,100 in the U.S. The co-working spaces operate under brands such as Regus, Spaces, HQ and Signature.
There are about 60 IWG locations in the Chicago area, with another 10 in the pipeline. More than half are in the suburbs, a trend that is accelerating, Dixon said.
“The growth has increased threefold outside the cities,” Dixon said.
The Chicago area ranks fourth in the U.S. with 234 co-working spaces totaling 6.29 million square feet, according to a study released Wednesday by co-working booking service CoworkingCafe. The top three co-working cities are New York, Los Angeles and Washington.
There were 6,163 co-working spaces across the U.S. at the end of June, a 10% increase over the first quarter, according to the study.
At the same time, the Chicago office market remains in a deep, pandemic-driven slump, with companies continuing to shed space as long-term leases come up for renewal, while sublease inventory grows. Office building vacancies were at a record 23.2% across the city and suburbs during the second quarter, according to real estate services company Newmark.
Vacancy jumped in the second quarter with the delivery of Salesforce Tower in the central business district, Newmark said in its just-published Chicago office market report. Salesforce, which leases 500,000 square feet of the building at Wolf Point along the Chicago River, scaled back before moving in, listing a fourth of the space for sublease.
Bob Chodos, vice chairman at Newmark, said co-working is gaining momentum because of the continued desire for flexibility in the workplace by companies, and the need for employees to find a better environment to do remote work.
Beyond geographic expansion, co-working spaces are also increasingly located in some unusual places, including health clubs, apartment complexes and retailers, Chodos said.
“I wouldn’t be surprised to see co-working seats pop up in lots of different places, like a Walmart or Target,” Chodos said. “You’re going to see more of it in other venues than just the traditional office building.”
WeWork ‘on steroids’
In May 2022, national fitness chain Life Time opened a co-working space adjacent to its new athletic club at One Chicago residential tower in the River North neighborhood. There are now more than a dozen Life Time Work locations across the U.S., tapping into an apparent demand to co-work where you work out.
BIAN, a $15 million, high-end private wellness club located on the ground floor at 600 W. Chicago Ave. in River North, better known as the Groupon building, is taking the concept to new heights.
The 25,000-square-foot club launched in November 2020, just as the second wave of the pandemic hit, essentially shutting most of the activities it offered, from yoga classes to spa services. Rolling out its full offerings in fits and starts, BIAN hit its stride last year and built up to 800 members.
In June, BIAN added a 9,000-square-foot co-working space for its members, a de facto activity that had taken over the club’s lounge, according to Joe Fisher, 53, CEO and co-founder of BIAN.
“We did not design BIAN to be hybrid co-working space,” Fisher said. “But as the world changed, what we saw was everyone using our lounge to co-work. They didn’t want to be at a Starbucks if you were a member of BIAN.”
A former corporate trial lawyer, Fisher co-founded BIAN with Kevin Boehm, a fellow Springfield native best known for his award-winning Boka Restaurant Group. Annual membership is $4,000, plus a one-time $1,000 initiation fee, and covers unlimited use of the co-working space.
The co-working expansion provides BIAN’s members the opportunity to do remote work with all the comforts of home — if home were a luxury wellness center with everything from a sushi bar to a cold plunge bath. The space includes two conference rooms with video screens, a lounge area, wraparound chairs and four private meeting rooms.
It also offers a sense of community, something many remote workers miss when isolated at their home office.
Dr. Robert Citronberg, executive medical director of infectious disease and prevention at Advocate Health Care, follows a hybrid work schedule. When he works remotely, he prefers to work at BIAN.
“I was doing it at home and talking to the walls,” Citronberg said during a recent visit to BIAN, plugging into his laptop in the new co-working lounge. “I just needed a place to come and this has been the perfect solution.”
Citronberg goes to BIAN regularly, starting with breakfast and dropping in fitness classes between work throughout his unconventional nine-to-five day at the office.
Kara Donato, 30, an enterprise technology salesperson, walks from her River North home on a daily basis to work and work out at BIAN.
“It really is this all-in-one place for me to come that honestly gets me away from my physical home that I typically work remotely in,” she said. “It’s a nice way to just get out of that space and see some other friendly faces and feel that we’re kind of in this together.”
Seated recently at a comfy couch and table in the new BIAN co-working lounge, Donato was preparing a colorful graphic for a customer presentation on her laptop, ahead of a planned call from a private room. A yoga class was also on her agenda.
“I can take a break, sort of recharge and then come back to work when I need to,” she said. “It’s nice that I don’t have to step away from work too much to be able to do something.”
Larry Wert, the longtime Chicago broadcast executive, is also a regular at BIAN, interspersing meetings, fitness classes and cold tub plunges since it opened in 2020.
Wert, 67, who lives in west suburban Riverside, commutes to the club several times a week. The expansion of the co-working space increases the utility of his remote office/gym, where he oversees a dozen businesses that occupy his time since his last employer, Tribune Media, was acquired by Dallas-based Nexstar Media Group for $4.1 billion in 2019.
“It’s WeWork on steroids,” Wert said. “The ability to time your fitness and wellness activity around some of your business activity really becomes efficient. I no longer have a downtown office.”
An East Bank member for 36 years, Wert shifted to BIAN and made it his office before they created the co-working space. With the added amenities, Wert says he plans to use it even more.
“It really is kind of a one-stop shop capability for what I would call a high percentage of my daily activity,” Wert said. “And I probably get more accomplished than I otherwise would if I had to go to three or four different locations.”
About 30 miles to the north of BIAN, is the Regus co-working space at The Landmark Center in Lake Forest, a prototypical suburban office center by the Tri-State Tollway overlooking woods, wetlands and the bucolic Conway Farms subdivision, where on a recent afternoon visit, deer walked the side streets with impunity. Across Route 60, Chicago Bears roam the fields at Halas Hall.
Inside are conference rooms, corner offices, a copy machine, lunchroom and center lounge with funky workstation pods ostensibly isolated by a few inches of cafeteria-style sneeze guard glass. Dozens of tenants, from attorneys and therapists to day traders and CPAs, filter through the nondescript hallways to more than 90 offices, connected by nothing more than a Regus co-working membership.
“I do not like working from home,” said Tom Yuen, 57, of Morton Grove, a facilities project manager who has been working at the Regus co-working office in Lake Forest since December. “When I’m here, I’m able to focus and do my work. I won’t be able to do that at home without interruption.”
Yuen works for a Hawaii-based government contracting services company that pays for the co-working space, a small, windowless two-desk private office. His employer “prefers” he come into the co-working space at least a few times a week, but Yuen chooses to come in nearly every weekday.
During the pandemic, Yuen worked remotely from home for his previous employer, and didn’t enjoy the isolation. Before that, Yuen commuted to Chicago each day, which he liked even less.
The shorter reverse commute to Lake Forest has restored the daily routines he missed, the amenities of an office and a better work-life balance, Yuen said. He also appreciates having enough Wi-Fi bandwidth to stop worrying whether his family’s web-surfing would crash the internet, a frequent occurrence during his work-from-home days, Yuen said.
Ups and downs at WeWork
Launched in 2010, WeWork became the poster child for the co-working boom and bust. A planned initial public offering imploded in September 2019 amid concerns about corporate governance and the path to profitability. Co-founder Adam Neumann was ousted and the company was taken over by SoftBank, whose previous investment had pushed WeWork’s valuation to $47 billion.
Then the pandemic hit.
While the co-working market has recovered broadly, debt-laden WeWork has continued to struggle, with CEO Sandeep Mathrani resigning in May, and its stock price closing below 24 cents per share Friday, giving it a market cap of $188 million.
WeWork is still a major co-working player with more than 700 locations in 39 countries. The company has nine remaining locations in Chicago after closing 125 Clark St. and 20 W. Kinzie St. over the past year. The most popular WeWork location in the city is at 515 N. State St. in River North, the company said.
There are signs WeWork is regaining some traction in Chicago this year, with All Access subscription membership bookings up 51%, and pay-as-you-go on demand bookings up 87% through May, the company said.
But WeWork doesn’t do the suburbs yet, at least not in Chicago.
Logan Karsten, 36, of Chicago, a WeWork All Access user, started a new job in June as a data analyst for a Colorado-based company that provides environmental information to the National Oceanic Atmospheric Administration and other federal agencies.
Working remotely for several different employers since the pandemic started, he moved to Chicago in 2021 to be closer to family. Karsten works four days a week at WeWork, and one day from home. He primarily uses the WeWork at One South Dearborn in the Loop.
Karsten pays about $300 per month for his All Access membership.
“I actually pay for it out of pocket,” Karsten said. “For me personally, I don’t view it as too much of a cost. It’s an investment. It gives me a place to go work so that I’m not at home and I don’t have to go to a coffee shop and spend eight hours buying coffees.”
While he has a second bedroom in his Logan Square apartment, he also has a roommate, making the home office less than optimal, Karsten said. But it’s the amenities — including an espresso machine — and the ability to network or socialize that clinched the deal for joining WeWork.
“I like working remotely, I just don’t like working from home five days a week,” Karsten said. “I go a little cabin fever crazy.”
Launched in May 2020, digital marketing agency Ice Cream Social was the brainchild of Mike Weiss and Victoria Roedel, two former ad agency co-workers who were locked down and unemployed in separate cities — Chicago and New York — at the start of the pandemic.
The agency has since grown to a 10-person shop with major clients such as Pepsi. They also started a side business to promote Ice Cream Social, with a fleet of three vintage Good Humor trucks plying the streets of Chicago and Detroit during the summer months.
As the business grew, Roedel, 31, relocated to the West Loop and Ice Cream Social began to look for office space.
“We really didn’t have the type of cash flow to be able to afford an office space,” said Weiss, 34, who lives in Edgewater. “But last year, it became quite clear that we needed a place to collaborate.”
After exploring traditional leases, they opted for WeWork, grabbing 200 square feet at 330 N. Wabash Ave. in River North on a six-month lease. The office space, which costs $1,800 a month, has been converted into a lounge with a couch, a fridge and a large map of Chicago to plot ice cream truck routes.
WeWork amenities include conference rooms, Wi-Fi, a printer and a sweeping 24th floor view. Weiss also touted the social aspects and the ability to network, with the agency hosting an ice cream social for fellow WeWorkers earlier this month.
“It feels like you get everything you would get in your own corporate office, but it’s not your own,” Weiss said. “We feel like we’re part of this big office, but ultimately we can be heads down and work without distraction.”
If Ice Cream Social continues to grow, Weiss would like to get his own space, where the agency and the trucks can be housed under one roof. But Weiss is in no hurry to leave his co-working space, and has no plans to return to his home office.
“Something that I definitely missed during the pandemic is the commuting and the going downtown and going to work and separating the places of work and home,” Weiss said.
