Down, But Not Out: Houston’s Smaller Coworking Firms Grapple With The Coronavirus

Houston’s first female-focused coworking space, Sesh Coworking, opened its doors in early February. Only seven weeks later, the company was forced to close the space temporarily, as the coronavirus pandemic shuttered businesses and schools across the city.

"It was going great, and then COVID killed our momentum a little bit,” Sesh Coworking co-founder and Chief Creative Officer Meredith Wheeler told Bisnow.

Every workplace is being forced to rethink how to bring people together safely. Coworking, which revolves around the shared use of space, is facing the particular challenge of how to provide a safe environment for many different users who don’t necessarily have a fixed desk.

The enormous impact of the pandemic caught the entire business world by surprise, but for a new small business, it has been a particularly trying time.

Prior to the pandemic, things were going well for Sesh Coworking, which is based in the Tribeca Lofts, at 1210 West Clay in Montrose. The space is very small, by coworking standards: a little over 2K SF.

Sesh Coworking had sold between 30 and 40 memberships during the seven-week period before work-from-home orders began, with plenty of day-pass users also interested in trying out the space.

When bars and restaurants began to shutter in mid-March, Wheeler and co-founder Maggie Segrich made the difficult call to close the coworking space as well. The company has postponed its grand opening event, which was originally slated for March 26.

“We don't have any revenue right now, basically,” Wheeler said. “We're covering what we have to do for operating expenses, on our own, out of our own pockets.”

Sesh Coworking applied for a Payment Protection Program loan, developed under the CARES Act and overseen by the Small Business Administration. However, Wheeler said she thinks the funds ran out before the business could be approved. The company has also applied for other loans and grants, but is still waiting on the outcomes of those applications.

Local Office opened its second coworking location in Houston at the beginning of the year. Like Sesh Coworking, the company had planned a grand opening event, but was forced to postpone.

“There's no question that the COVID-19 pandemic has affected our business and is affecting the industry,” Local Office owner and founder Scott Rubenstein told Bisnow.

The first Local Office location at West University Place, as well as the new addition in Tanglewood, are still accessible to members. Rubenstein said that for the most part, the people coming into the office to work are employed with essential businesses, while the majority of members continue to work from home.

Local Office has not seen a drop-off in memberships, which currently number around 150. Rubenstein attributes that retention to members’ original motivation to get coworking space: flexibility and lower cost.

“They don't have long-term commitments. They're not tied into a three-, five-, 10-year lease,” he said.

The expectation is that once the city begins to reopen businesses, those same members will return to Local Office to resume work.

Rubenstein is also founder and president of Pipeline Realty, which has acquired, developed, repositioned or redeveloped over 100 commercial real estate properties across the U.S., with the majority in Houston. Rubenstein has been able to compare the reactions of traditional office tenants to those using coworking or flex space.

“Frankly, I feel like there's less stress involved with our members at Local Office, in general, over this pandemic,” Rubenstein said. “Granted, if this thing goes on for longer, I do think we'll start to see a more significant drop-off in membership.”

Local Office's landlord is Pipeline Realty, which means Rubenstein is both its business owner and its landlord. Local Office opened its first location in 2018. Although the grand opening of its second location has been postponed, Pipeline Realty has already acquired another undisclosed property for its third location.

Unlike Sesh Coworking, Local Office has not applied for any government grants.

“We are eligible. We have not applied because at this point, we are able to cover our expenses and our payroll, and I think there's other companies out there, including some of our members, who need those funds more than we do,” Rubenstein said.

Coworking spaces are usually favored by entrepreneurs because of lower cost and commitment. But there are other benefits, too, like ample opportunities to collaborate with other small businesses in the same space.

The Cannon has three locations in Houston, with more than 600 members. The company was created specifically as an incubator for Houston’s startup scene.

“The idea for The Cannon was that we could expand on this concept of innovation hub, and incubator space, for startups, and then create a community around having a startup,” The Cannon CEO Jon Lambert said.

Although typical in-person collaboration has been disrupted, Lambert said The Cannon’s startup community has continued to stay connected online, using webinars and online content. The company is also offering advisory services to members around crisis management.

Like Local Office, The Cannon is still allowing members to access coworking and flex space. That access is intended primarily for workers of essential businesses, and the rest of the community has been asked to respect the work-from-home order.

“We've had light traffic through all of our facilities, and that continues until hopefully sometime here in early May, [and then] we'll get back to the whole community having access,” Lambert said.

One of the core challenges of the coronavirus pandemic is that so many small businesses have been financially affected at the same time. Lambert said that of the members experiencing financial difficulty, around 75% to 80% have either asked for help, or requested to place their memberships on hold until business returns to normal.

“Our longevity is our community's longevity, and so we're doing everything we can to try and help those folks through that process and be as flexible as we can in doing so,” Lambert said.

The Cannon received a PPP loan through Texas Citizens Bank, its banking partner. The company is also providing its members guidance on different financing opportunities, as well as access to banking resources to submit their information into the queue for various loans.

“We've been tracking and applying for everything that we qualify for that makes sense for us, as well as helping our community track and apply where appropriate,” Lambert said.

There has been rampant speculation around the future of traditional offices as well as coworking and flex spaces, as employers begin to consider how to prioritize social distancing and public health in the workplace.

Rubenstein said one simple action that could make a difference is removing seating, to limit the number of people in the office at the same time.

Local Office is also looking into retrofitting all of its common area fixtures to be motion-sensored and touch-free, as well as placing foot handles on doors. Another action under consideration is making hallways one-way, to prevent people from colliding or congregating.

“We're going to do it, it's not even a matter of when. My guys are putting it all together now, and we'll probably start doing it immediately,” Rubenstein said.

The implementation of these design changes will take place across all of Pipeline Realty’s office properties. Some things, like towel dispensers and hand dryers, were already touch-free. Extending that technology to other areas isn’t too large of a capital expenditure for the company, Rubenstein added.

Wheeler said Sesh Coworking hopes to open by the summer months, but will reopen as soon as it is safe to do so under government guidance.

“I do think that we would probably look at our seat spacing and just make sure that there's adequate spacing for everyone, just so that no one is being crowded in,” she said. “The good thing about our space is, if we have to tape the floor of that sucker, and tape it into 6-foot squares, we can definitely do that to maintain distancing.”

Sesh Coworking already used a professional cleaning service prior to the pandemic, but Wheeler expects that overall cleaning regimens will become even more thorough.

“I do think that we'll all need to be extra diligent, moving forward,” Wheeler said.

The Cannon was already using the services of cleaning company 1 Stone Solutions, which operates out of its facilities. The Cannon chose to upgrade those services, and the cleaning company started doing deep cleaning before access to the coworking spaces was limited.

That cleaning will be reimplemented, and Lambert said The Cannon is also considering removing seating to create more buffer space between individual users.

“As long as this doesn't become a reoccurring event, which none of us can handle, I think the first trend is going to be back to, ‘Hey, we need to think differently about how we cowork,’” Lambert said.

Ideally, extra sanitizing, cleanliness and a careful approach to proximity will ease coworking spaces back into a scenario that is not so different than what existed before the pandemic, he added.

One thing that may look different in coworking facilities, at least for a few months, is the presence of kids.

Texas Gov. Greg Abbott announced Friday that all Texas public and private schools would remain closed until the beginning of the next school year.

Sesh Coworking is working on a plan to accommodate longer child-friendly hours over the next three or four months — a feature that other coworking spaces didn’t typically offer prior to the pandemic.

“We are exploring options for how we can allow for more kids in our space, but at the same time, allow parents to still be able to get their work done,” Wheeler said.

Lambert said that before the work-from-home order, The Cannon had told members that children were welcome, but that parents were responsible for all supervision. The company is working on a short-term framework to accommodate more children, but Lambert acknowledged that the company’s coworking spaces were not initially designed with the constant presence of children in mind.

Rubenstein said Local Office is discussing the issue, as the coworking company had not been overly kid-friendly in the past. Some Local Office employees themselves have been forced to work from home in order to watch their children.

“It's a work environment, and a lot of times, children can be a distraction to other people working, and so we're going to have to think through that,” Rubenstein said.

Despite the short-term challenges, optimism remains around the future of coworking spaces in Houston. Wheeler, Lambert and Rubenstein all pointed to the desire for personal connections and collaboration, which is partially why coworking became popular in the first place.

“Whenever all this is over, people — we need each other, and we need to see each other, and I think that's more present now than it ever has been,” Wheeler said.

“I don't think coworking spaces are done for, by any means.”