Commercial Investment Real Estate Spring 2020 | Page 30

MORE EVOLUTION AHEAD
DOWN BUT
networking and mentoring opportunities. Health
The impact of COVID-19 on the demand for cowork-
NOT OUT
club chain Life Time Fitness has introduced Life
ing space remains to be seen. However, some industry
Time Work, a coworking concept that combines
experts firmly believe flexible space options are going
workspace with a health club experience. The compa-
to remain viable for a variety
ny has more than a half-doz-
of space users. Despite the
en locations with more in
surge over the past several
the pipeline in major metros
years, third-party operated
such as Minneapolis, Dal-
workspaces — including ex-
las, Miami, and Houston.
ecutive suites, business incu- Along with continued expansion, the flexible office In addition, Industrious an-
bators, and other alternatives
nounced a new co-branded
market is both maturing and evolving with new
— have been around for de-
partnership with Equinox
cades. Large global providers
last year that will bring co-lo-
business models and concepts. Providers are
have shown they can weather
cated workspaces to Equinox
working to differentiate themselves in a crowded fitness club locations with
downturns intact. “The stay-
ing power has already been
first location opening last
field of competitors by offering more specialized its
proven, and the demand for
December at Hudson Yards
this kind of provisional space
in New York.
amenities or services.
is growing exponentially,”
“We’re seeing more
Gladwell says.
and more flex operators
Along with continued
partnering with lifestyle and
expansion, the flexible office market is both maturing
amenity companies as it relates to health and fitness,
and evolving with new business models and concepts.
spas, and even medical capabilities on site within the
Enterprise models that create serviced coworking
flex space eco-system,” says Gladwell. That blend of
spaces for one business user have driven growth. Pro-
live-work-play will likely become more critical for
viders are working to differentiate themselves in a
companies to attract and retain talent in the future,
crowded field of competitors by offering more special-
especially with generations who have grown up with
ized amenities or services.
that type of thought process, she adds.
WeWork, for example, has continued to inno-
vate with new concepts, such as its WeWork Labs, a
Beth Mattson-Teig
membership-based business incubator that offers
A business writer in Minneapolis
BROKERING COWORKING SPACE: IS THE JUICE WORTH THE SQUEEZE?
Like it or not, the expansion of coworking is pushing flexible space that coworking space model is not a good fit for some companies,
options further into the mainstream for office brokers. The com- but it can be a good steppingstone to traditional office space, notes
mon question many ask is, “What’s the value proposition?”
Tran. “It is a good transitional space model,” he says.
Some brokers have been reluctant to show clients coworking
Flexible space options, much like any space, do need to be
space options due to the short-term nature of the space. Others in viewed through a lens of buyer beware. Because of what has hap-
the industry argue that coworking deals offer an opportunity to
pened with WeWork, there is concern — from both landlords and
build both relationships and revenues. Coworking providers typ-
tenants — about the viability of a location, says Soozi Jones Walker,
ically pay a higher commission rate on a percentage basis, with a CCIM, SIOR, broker and president at Commercial Executives Real
starting rate of 10 percent for the first year that drops the longer a Estate Services in Las Vegas. She and her husband, 2017 CCIM Insti-
tenant stays, notes Daniel Levison, CCIM, CEO of CRE Holdings
tute President Robin Webb, CCIM, were looking at coworking space
in Atlanta. Levison has a unique perspective into coworking as a options in Orlando recently where Webb is opening a new location for
broker, landlord, and owner-operator of SharedSpace, a coworking his investment brokerage and consulting business.
business in Atlanta.
It is important to ask how much term a coworking provider
The cost basis for commissions can be significantly higher
has left on their lease in the building, as well as understanding all
for a coworking facility versus a traditional office space on a per sf the costs, advises Walker. Depending on the provider, there can be a
basis. According to a research report from Colliers International,
variety of extra costs with up-charges on everything from using the
the monthly cost of leasing a single private office from a coworking
copier and plugging into the Wi-Fi network to reserving a private
provider across 19 surveyed markets ranges from $480 per month conference room. “So, it’s not just your monthly rent; you pay for
to $1,160. In addition, coworking deals are much less complex than
all these additional things,” she says. “A lot of people in a coworking
a traditional office lease. Brokers can often get a coworking deal situation don’t realize that. They think they can just go in and sit
done within a few weeks because it’s an easier document and there down at a desk and work.”
is less negotiation, adds Levison.
Clients who sign a month-to-month or one-year office lease
Coworking also has the potential to strengthen relationships.
produce a very different revenue stream for their broker versus
Broker Tim Tran, CCIM, founder and president of The Ivy Group, someone who signs a three-, five-, or seven-year lease. However,
helped one robotics company startup locate in a coworking facility.
at the end of the day, brokers need to show the type of space that
As soon as the firm secured its first round of funding, it was ready
their clients are asking to see. As such, it is important for brokers to
for a traditional office space that would provide more privacy than stay informed on the different coworking options in their respective
what the coworking space offered. Tran helped them relocate, first markets, as well as understand the differences that exist between
to a 4,000-sf space and now a 20,000-sf location. At some point,
different business models, terms, and costs.
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE
SPRING 2020