While the coworking industry has largely suffered in a Covid-19 world that’s kept workers at home, Chicago-based Novel Coworking is still, somehow, seeing demand and opening new locations.
Novel Coworking, formerly called Level Office, was founded in 2012 by Bill Bennett, who is also an adjunct lecturer of real estate at Northwestern University’s Kellogg School of Management. Bennett opened the first Novel location in 2013 at 73 W. Monroe St. in the Loop and now manages more than 40 offices in 33 cities (including five in Chicago), which encompasses 3.7 million square feet.
What sets Novel apart from some of its coworking competitors, like WeWork or Regis, is that Novel owns all of its own real estate, allowing it to offer more competitive pricing as its overhead costs are lower, Bennett said. Novel also hasn’t taken any venture capital funding, meaning it doesn’t have to answer to investors who were expecting a return.
At the onset of the pandemic in March, Novel saw tenancy slide. The company’s occupancy was down 8% in May but has been steadily growing since, Bennett said. The coworking company cut its prices and now, Novel has more tenants than it did pre-Covid, establishing 1,000 new leases since March.
The growth has allowed Novel to open several new offices in 2020. In total, Novel opened nine offices this year, including in Austin, St. Petersburgh, Fla., Miami and Washington, D.C. And in January, Novel is opening an office in Albany, New York.
Bennett explained to me the long-term effects of Covid-19 on the coworking industry and what Novel’s expansion plans look like for 2021.
This interview has been condensed for brevity and clarity.
Why did you originally launch Novel?
Bennett: I wanted cool and affordable space in a good location, and I just couldn’t find it. At the time, everybody pointed me toward Regis, which was the only player in the game.
When you founded Novel, did you set out with the intention to scale the company across so many different locations?
Bennett: We went into it with the aspirations of serving as many business owners and companies as we could. We anticipated that we would grow to many locations. That being said, we didn’t have the money or the team to do it. We’ve grown organically. We’re 100%-owned and operated by the management team. We’ve found that our formula works.
What is the biggest differentiator Novel has from its competitors?
Bennett: What really makes us different is that because we own the real estate, we’re able to charge less. A typical customer saves $5,000 to $10,000 a year at Novel versus at WeWork, Industrious or Regis. And on top of that, we have wider product range. We have everything from a dedicated desk in a private office to a private office to suites, which range up in size to 8,000 square feet in Chicago. That allows people to grow in the same building longer than they would just where’s there a collection of small offices. We offer more space and amenities for a lower price.
What initially happened to your business when the pandemic hit the U.S.?
Bennett: What we saw was that in March, the world just changed a lot, and changed very quickly. What we experienced was the hot-desk [tenants] largely just moved out and moved home. Thankfully, that was a very small piece of our business, but that dried up in 60 days. We saw 80% of those customers go away.
What are Novel's expansion plans in 2021?
Bennett: We’ll continue to aggressively grow in 2021. We have a number of traditional landlords asking us to bring Novel Coworking into their buildings and be a property manager to them, so we’ll be expanding that way as well. We expect to open somewhere between 10 and 20 locations next year in probably 10 new cities.
Looking back on 2020, what’s been the biggest challenge running a coworking company during a pandemic?
Bennett: It’s really been trying to act in a period of massive uncertainty. How can we make sure our staff is safe? How can we make sure our customers are safe? And how can we just continue to be at the cutting edge of everything when there’s a lot of information that’s changing daily and nobody has been through this before? It’s been a really challenging time for our staff to continue to figure out what to do every day.
What are the long-lasting effects of Covid-19 on the coworking industry?
Bennett: In terms of the other coworking companies, the harsh reality is a lot of them won’t continue to exist because many of them are in financial distress right now. The coworking industry will evolve into version 2.0, which will be much more like traditional property management and landlord-ing. It will carve off the layer of extra fees that exist right now by people renting space and re-renting it. I think there’s going to be a big shakeup in the coworking sector in 2021. I anticipate that we’ll see some carnage.
