The pandemic’s massive shift to remote work has boosted many companies’ productivity – and has left landlords holding millions of square feet of unused office space.
Converting all those empty desks and conference rooms to coworking spaces has become a savvy way to keep revenue coming in, but it’s not as simple as just leasing to a new set of tenants. It takes smart strategy and special expertise in the unique aspects of this dynamic new real estate specialty.
Benefits and Challenges
There’s plenty of opportunity in flexible workspaces (also known as “flex”). The Global Workspace Alliance counts an astounding 230 million square feet of office space lying vacant since workers started working from home.
Filling it with coworking tenants means you can collect more rent for the same space – bringing as much as 30-40% more net operating income than from traditional leasing, according to the Commercial Real Estate Development Association.
And that’s just the beginning of the benefits. No one wants to work in a building that’s only partially occupied, so your existing tenants may be willing to pay more rent. This, in turn, can help increase the overall asset value of your property.
At Venture X, we’ve found one of the biggest benefits is the opportunity for the property owner to build a community within their property. Instead of just existing as a collection of disconnected renters, tenants often create networks that form a new kind of company culture – one important element that has gone unmet with the switch to remote work.
Managing flex spaces also has its challenges. In today’s market, the typical landlord doesn’t have the resources, staff, or training to run their own coworking space; even traditional leasing is usually outsourced to management companies. And coworking members have come to expect hospitality and business amenities like coffee and snack areas, up-to-date technology, networking spaces and even receptionist services.
Because of this, very few landlords will find success in coworking without partnering with someone who has experience running flex spaces profitably.
It’s invaluable for landlords and property owners to join forces with an expert partner in coworking to tend to these important details and have a dedicated team to manage and support tenants’ distinctive needs. Additionally, traditional office leasing teams can benefit greatly from working closely with coworking sales teams and vice versa when it comes to sharing leads and marketing the property as a whole.
Having dedicated experts in the field, as well as a team of sales professionals and support staff can make all the difference in avoiding common pitfalls and generating a strong return on investment.
Next Steps in Adding Flex Spaces to Your Building
If you’re a landlord or property owner who has decided to add coworking to your building, here’s how to start:
- Mystery shop competitors to understand local demand and pricing and determine the amenities to invest in to make the space stand out in the market.
- Research the coworking brands and models that best align with your property and its needs. Not all operators are the same. Be sure to look at companies’ track record of success, executive leadership, expertise in the industry, etc.
- Find a coworking partner who knows how to run successful spaces in properties like yours.
- When ready to lease, create a mutually beneficial deal structure to keep the partnership in place long-term.
- Future-proof the agreement by staying plugged in and being open to reinvesting in areas that will continue to drive return on investment for yourself and your partners.
There’s never been a better time to add a coworking operation to your building. Hybrid work and the demand for flexible workspaces are here to stay.
While flex operation is a complex undertaking, especially for a property owner who’s new to the arrangement, working with an experienced partner who knows the market can simplify the experience and operate in the most profitable way.
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Sources
- 30-40% higher NOI from flex by Commercial Real Estate Development Association
- Growth of flexible office space by CBRE
- GWA Fall Conference 2022
