COVID kills city co-working, but suburbs show signs of life

One of Melbourne’s original tech co-working spaces, York Butter Factory, is the latest victim of the coronavirus pandemic, having shut its doors last week after liquidators failed to sell it.

The collapse follows the closure of Depo8 in Prahran last year and the ongoing struggles of global giant WeWork, which plunged from a $US47 billion ($65 billion) valuation down to $US9 billion as workers turned away from co-working spaces in the wake of COVID-19.

York Butter Factory co-founders Stuart Richardson (left) and Darcy Naunton.Credit: Luis Ascui

Such spaces were once touted as the future of the workplace, but the proximity to strangers in co-working offices and the increasing ability for people to work remotely mean the sector has fallen out of favour.

York Butter Factory once had three spaces in Melbourne and Sydney and more than 500 members, but liquidator McGrathNicol said it collapsed owing millions to the Tax Office and landlords.

McGrathNicol partner Rob Smith said that before COVID-19 hit, York Butter Factory’s revenue was growing and the business had been tracking well.

“It’s just been decimated,” he said. “Government relief and support has not been enough to keep it going through such dismal kinds of occupancy levels, unfortunately.”

Mr Smith said he expected to see more collapses in the co-working sector.

“I see the space as really challenged for a long time really. With the working-from-home trend, which is here to stay, and people able to work from anywhere any time, it really makes co-working a difficult proposition,” he said.

“The tools and technologies have advanced so much, or at least a couple of them, that people can now collaborate so much more easily online, and using other tech applications, the need to sit next to people has reduced for early-stage [companies] and startups.”

Mr Smith said he did not expect co-working would reach the popularity it had pre-COVID for a long time, but the tech sector itself would continue to thrive with teams working remotely instead.

Entrepreneurs Jodie and Erz Imam made the leap before their business collapsed, and closed their co-working space Depo8 last year after going from 83 per cent capacity at the start of March to zero members once coronavirus hit.

“We took the decision to jump straight away – we knew, we weren’t coming out of this,” Ms Imam said at the time.

Jodie and Erz Imam closed their co-working space Depo8 after demand dropped significantly during the pandemic. Credit: Joe Armao

However, suburban co-working spaces have not been as hard hit as those in the CBD. Co-working business @Workspaces, which operates in Richmond, Toorak, Brighton and the city, has remained open throughout the pandemic.

Founder Jenny Folley said demand from Toorak and Brighton clients in particular had surged during COVID.

“In fact we had a lot of inquiries from people living close to our suburban locations because they found it difficult to work from home.”

Ms Folley said demand had changed, with clients more interested in renting private offices rather than sharing in a co-working space.

“Larger companies are coming and exploring, looking at giving up commercial space,” she said. “We’re all learning a new way of working. We’re finding people love shared areas where you can collaborate, kitchen areas to make tea and coffee, [and] gather together.”

She said there was a future for hubs all over the suburbs where clients could drop in and use meeting rooms, private offices or garden settings.

“A lot of smaller operators will shut their doors, because I think a lot of them targeted startups,” she said. “To me, you can’t run your business with startups because if something happens, they’re the first ones to go.”

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