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How Can Landlords Double Their Rental Yield by Working with Coworking Space Operators?

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Globally, the commercial real estate sector has witnessed rapid changes in recent years. In lieu of the Covid-19 pandemic, businesses in Pakistan experienced major shocks that shifted their attitude towards offices. This major disruption, among other market fluctuations, have reshaped business leaders’ perception of office spaces and their value, especially among young workers.

In these changing times, coworking spaces have gained massive popularity in Pakistan. The industry has come a long way since the time we launched our first Kickstart location in February 2016. Our first location was a small 40-desk office. Today, Kickstart manages 3,000+ desks across 12 locations in Lahore, Karachi, and Islamabad, with an equal number of members using our spaces on a daily basis. 

Why have coworking spaces become so popular recently?

This growth has been possible because coworking tenants save on capital expenditures with flexible leases that allow them to scale up or downsize on a few days’ or weeks’ notice.

Moreover, occupiers don’t have the hassle of setting up and managing an office themselves. The vibe, culture, and networking opportunities on offer massively enhance the experience of coworking for today’s workers, resulting in the greater well-being of team members. 

Based on our experiences at Kickstart, here are the three main reasons why coworking spaces continue to grow in popularity post-pandemic.

A view of coworking members at Kickstart in Pakistan.

1) Today’s occupier wants flexibility

The Covid-19 pandemic caused many businesses to change their plans or shelf them altogether. Office spaces that were previously leased and outfitted at great expense were left vacant because of new work-from-home protocols.

Just when businesses were recovering from shutdowns and slowed progress in 2021 and 2022, shocking oil prices arose, which affected economies globally. With soaring interest rates and high inflation, some businesses had to shelve their expansion plans again, stalling a return to office

For example, a startup that was newly expanding in Pakistan and the GCC (Gulf Cooperation Council) countries reached out to us at Kickstart with an offer to utilize their office space. They had spent hundreds of thousands of dollars to lease and build a nice office. The office’s furnishing and finishing was due to be complete in a couple of weeks when the need for so much workspace suddenly shifted. The company had to resort to finding occupiers to sublet their extra space, which is where Kickstart was able to step in and assist.

To avoid these kinds of experiences where too much space is acquired, businesses are now poised to adequately calculate their workspace needs. For most, it is clear the flexible leasing model offered by the coworking spaces is the way to go.  

2) SpaaS: Space-as-a-Service

Companies today do not want to spend their money and resources on setting up and managing an office. Smart financial leaders in both large-scale corporations and startups alike have started to discard the notion of having huge capital expenditures on their balance sheets. As such, many businesses are starting to opt for leaner month-to-month models when it comes to their office assets.

Moreover, in the traditional leasing model, companies have to deal with real estate brokers, hire architects, interior designers, and contractors to build the office, and employ administrators to manage the office. By opting for coworking spaces, which include a full array of services, companies are able to sidestep all of this.

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3) The office as an experience

Today’s workers see the office as more than just a place to work. Millennial and GenZ employees place high value on the overall office experience, often making career decisions based on the culture and atmosphere of the workplace.

The workspace experience is shaped by the atmosphere, quality, location, fellow colleagues, and events and activities happening in the office. A quality coworking space has the “end-user satisfaction” as part of its ethos. 

A view of a coworking space in Pakistan.

Specialist operators understand nuances

It is the job of a specialist operator to optimize all aspects of a building for both occupiers and landlords. Leasing and building pristine office spaces, and running them efficiently 365 days a year, requires a specialist.

For operators, it is important to develop a viable business model that has mature operations and sales functions to maintain a healthy occupier pipelineOnly then can this model solve for the flexible, hassle-free experience that today’s occupiers want and generate a profit as well.

Tried-and-tested financial model

A multi-location operator normally has a tried-and-tested financial model in place. With various iterations, operators can accurately predict the yield that a coworking space is going to offer. 

Efficient space planning and customer-centric layouts

Building out a coworking space with an efficient, optimized layout requires knowledge of the workflow of prospective and current occupiers. Experienced operators are able to figure out what is the best layout for any particular location. For a landlord, it might take years to figure out the perfect setup. 

Daily operations

Building out a coworking space is a one-time job. Running it efficiently is a daily job that seasoned operators carry out 365 days a year. Mature operations and sales functions are therefore imperative to running spaces smoothly everyday. 

A view of coworking members at Kickstart in Pakistan.

Why landlords and coworking operators work well together

Working under different management agreements with landlords, coworking operators can manage their properties and keep them occupied over the long term.

Consistent occupancy and diversification of tenants

The coworking model rests on diversification of tenants and keeping a solid sales pipeline to ensure that vacant spaces are quickly filled. Partnering with a coworking operator gives landlords the opportunity to keep the building occupied. By entering into this partnership, landlords can take advantage of coworking operators’ ability to onboard the clients.

Beautifully-designed and well-maintained buildings

Coworking operators keep a deep involvement in operations, with dedicated operations and maintenance staff managing and maintaining each property. With this operational structure, a building’s upkeep is ensured for the long run. Ask any landlord who has let their building to a quality coworking operator and they will tell you that their building is very well maintained.

Significant increase in rental income

Partnering with coworking space operators is not just be a simple lease-relationship. The landlord also becomes a partner in the profits, which can significantly increase their rental income.

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About Author

Saad is a co-founder of Kickstart, Pakistan's largest coworking operator with locations across three cities. Currently, we are helping 3,000+ regular members conduct their business at 12 locations, with 175,000+ sq. ft. under management.

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