LiquidSpace has partnered with Santa Cruz, Palo Alto and San Francisco to list 27 workspaces in 16 government buildings (mostly libraries), including previously and independently listed Bay Area government spaces from Sonoma to San Mateo. The aims of the partnership are twofold. Firstly, the city governments believe that keeping more commuters closer to home will mean more dollars spent in the local community.

“Over 30 percent of our local work force commutes to Silicon Valley on a daily basis, and so we’ve recognized the tremendous opportunity to create more opportunities for our citizens to work closer to home. Supporting mobile working is absolutely vital to the economic health and well being of the community,” said former mayor of Santa Cruz, Ryan Coonerty. And Sid Espinosa, the former mayor of Palo Alto agreed:

Here in Palo Alto we’re specifically engaging in a number of public and private partnerships with local tech companies like LiquidSpace. We not only want to support the companies that keep the Bay Area at the forefront of the technology industry, but want to use their unique products and services to support other entrepreneurs and the community as a whole.

The second goal of the program is environmental. “City governments are recognizing the opportunity to make taxpayer purchased real estate assets work smarter and harder,” said Mark Gilbreath, CEO and co-founder of LiquidSpace, who noted, “we have enough built-out office space on the planet to meet all of our collective needs for the next fifty years.” By putting what’s already out there to better use, the partners aim to reduce waste and the carbon footprint of their communities. The director of the City of San Francisco’s Department of the Environment Melanie Nutter explains:

We, as government entities, must lead by example in the area of sustainable economic development policies and practices. Commercial real estate accounts for 55 percent of our carbon footprint, and when mobile workers can leverage spaces nearby, we can optimize that building use and shorten commutes.

Do you see more collaborations between the coworking movement and government planners coming in the future?

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According to Steve King, a partner at Emergent Research, the same can be said of coworking, a nascent shift in work that involves far less than one percent of workers at this stage but is generating outsize interest from thinkers and writers. Born as a social movement to build community, reduce isolation and also, for some, save the environment from the effects of commuting, coworking is undergoing a fundamental shift in its nature from a social movement to a solid business sector, King told GigaOM. Like any new sector,

You start with a lot of people that are evangelists for the area and they’re really into it as a trend, or as a social movement, but they’re not necessarily the most skilled business people. The pioneers come in and get things going. There’s usually a lot of experimentation and a lot of the early people don’t make it work. But if the underlying business is solid, what you’ll then see is a second wave of people coming in that are thinking through it more as business people. That second wave, generally speaking, are the ones that tend to come up with the business models that work.

One of the very first coworking facilities we visited in ‘06, a place called The Hat Factory, you looked at it and said: ‘This is really cool. This has really got potential, but no time soon.’ But starting about 18 months ago we saw that business models were starting to emerge that were looking successful and that lead us to believe the trend had a really good chance of making it. We’re very optimistic and forecasting that there will be a lot of coworking going forward.

Of course, this influx of business savvy talent into coworking and the changes to how spaces are conceived of and run that they’re introducing, doesn’t mean the total demise of less profit-oriented ideas of coworking.

A lot of the purists will continue to be very successful on their own terms. Many people are much more motivated by other issues than money and building a business, and many of those will continue to be successful with their model. I would point to Office Nomads in Seattle. The owners there are committed environmentalists, committed to their community and their neighborhood and see coworking to push forward that social agenda in a way that they feel good about. In their case they’ve figured out a way to make the coworking thing break even. They have other jobs and they own the coworking facility. They’re smart people and they put together a business model that says, as long as I can make this sucker break even and maybe do a little bit better then that’s a huge success. No matter what else happens with the movement, they’re not going to suddenly shift and try to turn it into a bigger business or a more profitable business because that’s not their goal, and that’s true of a lot of people in the movement.

But folks like the owners of Office Nomads increasingly have company from the likes of NextSpace and pariSoma, says King. These new-breed spaces were founded with more traditional business plans and with both monetary as well as social goals in mind. And just as the first-wave feminists looked askance at some in the second wave and the third had issues with both its predecessors, this influx of new voices into coworking is stirring debate in some quarters.

“We had a coworking owners meeting a few months ago in Los Angeles,” King says. “It consisted of sort of the old guard and the new guard. The people that start a movement like this lose control of the movement if it’s successful and they don’t like it because it was their baby. That’s what’s happening with coworking. The original founders of the movement have effectively lost control and it’s very frustrating for them.”

As the term coworking morphs and spawns hybrids, from jellies and makers’ spaces to startup incubators and internal collaboration spaces created by corporations to spark innovation (and even to the horror of some, gets adopted by community-less purveyors of flexible spaces such as Regus) arguments are erupting about exactly what sorts of spaces get to wear the coworking label.

But for King, the expansive future of coworking is big enough to accommodate a wide range of models. “I do think coworking is in the sweet spot of multiple trends that are converging,” he says, citing the rise in contingent and independent work, tech trends and companies’ ever-present desire to drive down real estate costs. “This will be the year where the size of the industry starts to accelerate more rapidly,” he predicts, but it will diversify as it grows. And that’s OK with King.

Citing the difficulty his firms faces in even counting coworking spaces (about 700-800 in the U.S. is their best bet) due to the heterogeneity of the movement, King concludes: “Coworking is always going to be on a spectrum of which they’ll be sort of this far end, purist view of the world that actually fits the traditional definition of coworking all the way down to jellies at libraries with a lot of stuff in between.”

Are you horrified or excited by King’s prediction of a more profitable, more diverse future for the coworking movement?

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How are the founders you spoke to doing financially? Is the economic model of coworking tricky to get right or relatively easy to figure out?

Andrew: Before even opening a coworking space, a potential owner needs to find out what the actual local demand is. One of the best ways is to hold a “Jelly.” Find out who is interested. What are they looking for? Facilities, location, mix of businesses in the space, pricing, ratio of full-time to part-time members, open desks vs. dedicated desks vs. private offices? It’s not an exact science. It’s not, “Build it and they will come.” Often, to the dismay of a number of owners who have had to close down their spaces, people are not flocking to their spaces automatically. Owners have to adapt to the local conditions.

Take a look at membership turnover rates. On one hand, high turnover rates can be seen as a sign of instability or that the community is in flux; on the other hand, it can signal that a space attracts and cultivates superstars that are steadily expanding and find they have little choice but to “graduate” and leave for bigger, greener pastures.

Many founders see coworking as a space where businesses get an extra boost and then move on. Brian DiFeo of Hive at 55 told us, “I think inherently there will be a high turnover since successful businesses should grow out of a coworking space.”

Affinity Lab in D.C. has been in operation since 2001, even before coworking was a coined term). Those that leave the Lab go somewhere else because of space constraints. Co-founder Berit Oskey told us, “The businesses that have left and gotten larger office space have done so because they are either tech companies that are taking on more employees, or they are nonprofits that need more space for interns.”

Many businesses and organizations see coworking as an intermediate step in their life cycle. If they are looking for a temporary place test the waters of their business model and viability as companies, coworking can provide the accessible desk space and office facilities with minimal risks.

Genevieve: One of the biggest reasons for a space to close is that it can’t meet the membership threshold to cover the rent and keep the lights on. As a result, one in every five coworking spaces has closed its doors, according to studies done by Emergent Research. So that puts pressure on coworking spaces to decide “what” they want to be and “whom” they target.

For many spaces, it created a tension between wanting to promote the community but also being ruthlessly business-minded so that you can keep your doors open. Spaces try to balance the two.

There are certainly those who advocate for community first; many first-generation coworking spaces focus on that as their primary objective. They want to push a movement, not turn profits. But it’s absolutely essential to espouse good business practices. Jim Graham, co-founder of Satellite Telework Centers told us, “One of the challenges I’ve seen with some coworking spaces is the founders do it for the passion but haven’t developed a solid business plan… This is a business for us, albeit one that we hope helps local residents, local business owners, and the community in general.”

What are some ‘best business practices’ for coworking spaces?

Genevieve: Some ideas touted around include everything from experimenting with membership models (testing the optimum ratio of open desks to private offices) as well as exploring more unconventional practices like private and public sponsorships and franchising.

Gangplank in Arizona is doing interesting things. They are a no-fee model, meaning they don’t charge people to use the space. Instead they rely on “anchor companies” that take on operational responsibility — managing the space and making sure it keeps its doors open. They shoulder the responsibility and the space doesn’t have to hire staff.

They also get sponsorships for Internet access and work out contracts with local government for deals on real estate and electricity. At their two new locations in Avondale and Tucson the local government donated the use of buildings where the space will be housed.

Hive at 55, a space in New York City, is part of the city’s overall urban economic development program to promote its media and technology industries. It received a city grant from the New York City Economic Development Corporation, and partners with Pace University, the Freelancers Union, GuruLoft, Girls in Tech, the Hatchery, and others.

After conducting your research, where do you see coworking going next?

Genevieve: The conversation on coworking is shifting to spreading coworking as a movement to areas outside the usual urban innovation centers like San Francisco and New York City. Once we start talking about coworking as not only a development engine for individuals and startups, and as an engine of growth for local economies, that’s when coworking starts turning heads. Just from my background working on economic development projects overseas, I think what’s exciting about the future of coworking is its enormous potential to spark growth in depressed areas.

Digital technology is leveling the playing field. When I worked in development, microfinance was touted as strategy to get small businesses access to finance to grow their microenterprises. Growth was associated with access to capital. Well, what about access to information and know-how? We should start talking about creativity and innovation as catalysts for economic growth. It counts just as much in expanding any enterprise. Collaborative knowledge sharing is what coworking is about, so in that way coworking is a great way for startups and small companies to access ideas, tips and strategies to get their businesses up to scale and more competitive.

We also see the trend of employees exploring coworking spaces as place to work. As telecommuting and flex work options get more popular among big companies, coworking spaces will start to see an influx of remote workers. That will certainly change the dynamic. Hopefully, the openness and collaboration you see in coworking spaces may start to filter through to corporate culture.

Andrew: Another trend we see is existing spaces expanding to multiple locations. A lot of spaces are expanding as franchises to other locations, rather than creating a giant single space. The Hub, NextSpace, Gangplank, pariSoma Innovation Loft are a few spaces that are rolling out multiple sites. Just like Starbucks, you can’t have a few big Starbucks locations. Coworking spaces need to stay relatively small and localized. People don’t want to travel across the city to go to a big coworking space.

Part of it is to meet the increasing demand for coworking spaces. Faced with a depressed economy, many people are taking the opportunity to start their own businesses. The Atlantic published an article last month on how freelancing is the next ‘Industrial Revolution’. Coworking provides the structure to really make freelancing and startups a preferred work option.

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It’s an idea we’ve covered before, noting the trend of “rural sourcing,” which offers the dual benefits of lower wages to companies and economic development to out-of-the-way places (also, plenty of workers simply prefer the lifestyle – and lower property prices – of more rural area). But it’s not just corporate remote employees that are bringing big city work into small towns; co-working spaces are hoping to achieve the same thing for freelancers, startups and small businesses.

At least that’s what local Kentucky-focused site KYForward recently suggested. Reporting for the site, Mark W. Kidd outlines the efforts of economic development non-profit Virginia Economic Bridge to bring coworking to central Appalachia with the opening of a space in Radford this fall. According to Kidd, the organization sees several reasons coworking might be a good fit for rural communities:

Coworking is flexible enough to accommodate for-profit, non-profit, or agency ownership, making the model adaptable to local economic and funding realities. Underutilized commercial space is common in many rural communities, and coworking’s flexible, do-it-yourself ethos is particularly suited to adaptations of existing space. This approach also offers resilience, because earned income through membership fees should cover the operational costs of a coworking space, regardless of whether the group seeks added grant or investment funding to procure special equipment or other shared resources….

Coworking bypasses logistical barriers like access to secure, broadband-ready space, features that can be especially vexing for innovators in small communities…. Existing organizations with community facilities – like craft centers, libraries, community colleges, and churches – could be excellent partners for establishing a coworking space.

Besides these advantages, there’s also the money remote workers utilizing the coworking space put back into the local community. Out in California, NextSpace used an economic development model to sell the idea of a coworking to the local authorities, noting that while it might be hard to attract a big employer to airport-less Santa Cruz, there was little stopping individual remote workers from basing themselves there.

“We realized after chasing a lot of companies that instead of attracting one 200-person business, we should attract 200 one-person businesses. The economic impact is bigger, and some of those businesses will grow,” the mayor explained.

A similar argument should apply to Kentucky, though the experiences of other coworking spaces in less urban areas suggest that overcoming lack of awareness about the movement will likely be a significant problem. Luckily, crafty coworking spaces are already coming up with creative ideas to raise awareness.

Is coworking a good way to bring city-sized paychecks to more remote communities?

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“We realized after chasing a lot of companies that instead of attracting one 200-person business, we should attract 200 one-person businesses. The economic impact is bigger, and some of those businesses will grow,” he told Fast Company.

NextSpace, the start-up co-founded by Coonerty, just closed a $700,000 fundraising round and now has four locations in California. In Santa Cruz the space has attracted 200 members and has also proved a boon to nearby businesses, which are serving the programmers, therapists, comedians and lawyers who utilize NextSpace.

In an interview, Jeremy Neuner, the CEO of NextSpace, said that coworking spaces’ ability to boost local businesses and create jobs was very much on the NextSpace team’s minds as the company expanded, explaining that the promise of a lift to the local economy made convincing communities to welcome NextSpace easy:

In many cases, that’s the door opener. If you get a politician to open their mouth, the first five words out of their mouth are going to be jobs. As a matter of fact, the city of San Jose, their economic development director and the council member who represents downtown San Jose came to us. They said, ‘Look, much like the success you guys have had in Santa Cruz and San Francisco. We really think this is going to be good for our downtown and will you come and open up a NextSpace here?’ They were looking at it from that original notion of economic development and job creation.

Coworking makes sense for the community, Coonery agreed when speaking with Fast Company, while also underlining that it makes sense for individual workers as well. “The 9 to 5 at an office is a relatively recent phenomenon in human history, and I think it’s a short-lived phenomenon,” he says. “I don’t think it makes much sense to have all your people spend 45 minutes in traffic, come in, limit their interactions to each other, and disperse those people out at five or six at night.” Look for the trend to continue gathering pace, then.

Would a co-working space be an economic benefit for your community?

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