2023 June-July Analysis

Georgia joins the coworking craze

Map of coworking spaces in Tbilisi as of summer 2022. Source: Colliers

The effects of the pandemic seem to have long faded in Georgia as tourists have returned in record numbers (up nearly 40% in Q1 2023 compared to 2019), while new restaurants and bars are popping up at an unprecedented rate. The country continues to enjoy an economic boom, registering 10.5% growth in 2022 – its first full year free of Covid restrictions. But one Covid effect that lingers more than three years on is the debate over whether or not workers should return to the office. What started as a necessity amid public health concerns is now seen by many as more of an expected perk of the job than a temporary health measure.

On the back of the rising popularity of flexible working arrangements, another industry has begun to flourish: coworking spaces. Once relegated to startups and freelancers looking for a space that offered the independence and freedom of individual work combined with the community feel, coworking has now become a fixture for a growing number of workers who hail from a multitude of professions. Demand for coworking is rising globally as businesses slash overhead costs by abandoning large commercial spaces and remote workers seek out community. Figures collected by Statista show that worldwide in 2023, there were an estimated 34,618 coworking locations, with Coworkingresources.org approximating that nearly five million people will be using coworking spaces worldwide in 2024.

So what is the state of the sector in Georgia? And is the recent proliferation of collaborative working spaces in the country representative of a wider working culture shift, or a temporary trend induced by the pandemic and a short-term wave of remote workers? Investor.ge takes a look.

Coworking kicks off in Georgia

In Georgia, the coworking sector was still in its nascent stages before the pandemic struck, with a 2020 Colliers report finding that Tbilisi only had seven such spots in 2017. That number had increased to 16 locations in the first month of 2020, with first-to-the-scene Terminal then dominating the market. The Georgian coworking startup, which first opened its doors in 2016, has continued to expand over the last seven years, adding six locations and bringing in 3.1 million GEL in revenue in 2021.

Next on the market after Terminal was Impact Hub Tbilisi, a member of the larger Impact Hub network that offers coworking spaces in 100-plus locations in more than 60 countries worldwide. Co-founder and Co-director Elene Jvania says opening their space in 2016 was a big leap of faith at a time when the market was not yet established.

“The idea to open the space actually came after my business partner, George, visited an Impact Hub in London,” says Jvania, noting that at the time many in Georgia had never heard the term ‘coworking’ before. “When businesses open, they often face the challenge of building brand awareness – for us, we had to start by explaining to people what coworking is. We made a list of potential clients and went door-to-door, explaining our concept to them and trying to build interest in the idea.”

Jvania says that her team set themselves apart by emphasizing the collaborative and community-based elements of Impact Hub as a coworking space as opposed to traditional office rentals. “Our vision was to bring together people from a wide variety of professions so they could meet each other, create a community, and collaborate,” she says, noting that programs like their annual Social Impact Award, which celebrates social entrepreneurs in Georgia, and their work with the country’s burgeoning startup ecosystem helped cement their reputation as more than just an office space.

Over time, she says the idea began to catch on within Georgian circles. “When we first opened, our clients were mostly international – mainly people who were already familiar with the concept of coworking. Now, I would say 70% of our clients are Georgian, which makes for a great coworking environment that’s diverse and friendly to both foreigners and locals.”

Covid’s remote work revolution

While lockdown measures and harsh restrictions may have caused coworking spaces to temporarily falter in the early days of the coronavirus, many of Tbilisi’s coworking space owners and managers say the pandemic became a major impetus for the sector’s rapid growth.

“March 2020 was a very hard month for us,” says Area Sales Manager at IWG Ruska Chakvetadze, who oversees two Regus coworking spaces in Tbilisi. “We saw cancellation after cancellation as people increasingly decided to stay home out of fear of the coronavirus.”

“But this was very short-lived. As many companies continued their work-from-home policies, we actually saw a big uptick in demand,” she says, adding that the company ended 2021 with occupancy rates of 92% for its coworking and office spaces in its Saburtalo and Freedom Square locations.

This increased demand for flexible work space outside of the home, echoed by other coworking managers, is unsurprising given Tbilisi real estate trends. A recent TBC Capital report revealed that in 2020, nearly 70% of purchased flats were smaller than 70 square meters. In line with urban trends of smaller living spaces and coming off the back of a year of being stuck at home, Chakvetadze says “people were tired of working from home. They wanted to escape to a place where they could enjoy a nice working atmosphere.”

Much like Regus, Tbilisi’s Moxy Hotel, located near Saarbrucken Square, saw a huge uptick in demand for its cost-free “unofficial” coworking area. Located in the hotel’s lobby, the space has been open since the hotel started operating in 2018. But on the back of increasing demand for these types of spaces in 2021, Manager Katya Tkemaladze says her team was forced to make a change.

“Our unofficial policy has always been to welcome guests and non-guests to enjoy our lobby area, grab a drink, and work on their laptops. But towards the end of 2021, we became overwhelmed with the number of people coming here to cowork.” To mitigate demand, the hotel began an official coworking offer in early 2022, allowing non-guests to use the space for a flat daily fee of 20 GEL.

“We are first and foremost a hotel,” she explains. “So, our first obligation is to our guests and ensuring they can enjoy our facilities in comfort. Once we ensure that, we are more than happy to accommodate those looking for a nice atmosphere to work in,” she adds, noting that while the new pricing model helped moderate the number of people coming, demand remained strong.

A second surge

On the back of already growing demand in 2021, Georgia’s coworking sector experienced another unexpected shock as Russia invaded Ukraine in February 2022 and between 100,000 – 150,000 (estimates vary) war-affected migrants poured into the country – many of which were remotely employed.

“We were immediately overwhelmed with bookings,” says Regus’s Chakvetadze, noting that the company’s dynamic pricing model caused a surge in prices. “Because our system automatically adjusts our daily and hourly rates based on demand, our prices increased 50%. Despite this, we still didn’t see demand falter – we’re currently at 98% occupancy.”

Impact Hub Tbilisi’s Jvania says there were days when they had to turn people away. “We operate with a set number of fixed contracts and keep a certain number of spots open for day passes to ensure we have a continued mix of people coming into the space and don’t become just a regular office space,” she explains. “We were already almost at capacity before the war, so there were days – and still are – when we have to turn people away. We simply don’t have the space.”

As many of Tbilisi’s official coworking spots filled up, “unofficial” popular working spots like Fabrika and Stamba Hotel, as well as many of the city’s coffeeshops, instituted laptop bans for the first time – barring remote workers from ordering a drink and setting up shop for the day.

But as demand continued to quickly outpaced supply, a deluge of new coworking places entered the market, offering flexible hourly, daily, weekly, and monthly options.

The latest available data collected by Colliers in the summer of 2022, which does not capture the majority of new players entering the market in response to the migration influx over the last year, estimated coworking spaces had already grown to 23, offering approximately 2,500 available desk spaces at average daily prices of up to $17.

Betting big on the sector

As coworking places continue to proliferate in the capital, some have begun to question if Georgia’s coworking craze is a trend that risks losing steam as the pandemic and the impact of the war (hopefully) fade into the country’s collective memory.

But growing evidence suggests otherwise. In U.S. trends, for example, while companies like Amazon, Starbucks, and Disney all recalled workers back into the office this May for a hybrid three-days-a-week in-office arrangement, a study released by Harvard and Stanford in April revealed that out of 50 million analyzed job postings, 12% explicitly offered remote work – a figure that is up four-fold compared to pre-pandemic. At the global level, data gathered for the Flex Report, which collects insights form more than 4,000 companies employing more than 100 million people around the world, found that the share of offices utilizing a hybrid working regime stood at 30% in the first quarter of 2023, up from 20% at the end of 2022.

In Georgia, surveys done by TBC Capital show that 35% of war-affected migrants polled said they plan to stay in Georgia for two years or longer. Further to that, 72% of those surveyed indicated that they are currently employed by a company outside of Georgia – suggesting that the “migrant boost” to demand for the country’s coworking sector seems here to stay for the foreseeable future.

Regus’s Chakvetadze says she also thinks the increase of international coworkers are indirectly boosting the concept’s popularity with Georgians. “Everywhere you turn, there are new coworking spaces opening, which is bringing the concept of flexible and remote working to the forefront of discussions – I think this will contribute to more rapid acceptance locally and have an impact on Georgian working culture.”

Among the most recent coworking iterations creating a buzz is D-Block Workspaces from Adjara Group, the visionaries behind the widely popular Rooms Hotels collection and Fabrika. Located within the grounds of Stamba in downtown Tbilisi, the new coworking space is slated to open at the beginning of June, offering 10,000 square meters of creative workspace, including desks, a sound recording studio, a screening room, and various types of meeting rooms.

“Our research showed that there is a strong demand for workspaces that go beyond providing basic amenities like good lighting, furniture, and equipment,” D-Block Executive Director Ani Dabrundashvili told Investor.ge. “Both Georgians and international visitors are looking for an environment that fosters a sense of community, offers opportunities for personal growth, organizes curated events, and facilitates networking with potential partners and investors – that’s what we’re aiming to create here.”

Dabrundashvili says she only sees the coworking trend expanding in Georgia, noting that Adjara Group has another Tbilisi-based space in the pipeline as well as its upcoming Radio City project – a “city within a city” located 16 kilometers outside of Tbilisi, which aims to “create a new and distinctive center of attraction in Tbilisi where entrepreneurs, startups, and artists can realize their ideas.”

Along with Adjara Group’s plans to expand its coworking to Kutaisi and Batumi down the line and Terminal’s latest space, opened in Batumi in the fall of 2022, it seems Tbilisi’s coworking craze is already permeating to the regions, with major players betting this new way of working is here to stay.