If there’s one word that sums up commercial real estate in the Big Apple today, it’s competition. Companies offering co-working spaces are in a tug-of-war with traditional properties for the same tenants. Co-working concerns have snagged quite a few. Utilizing co-working space feels very comfortable to many prospective tenants who have already embraced working remotely. They understand how remote work sites can affect a bottom line while pleasing workers who hate commuting. The concept of co-working spaces has two basic models. Each offers a myriad of possibilities.
Rented Corporate Space
The corporate co-working concept is simple. A company rents co-working space to establish a satellite office or digs for its entire staff.
The question is whether to go with a lease in a traditional commercial property or to sign up for co-working space. In the first few months of 2018, 16 co-working companies leased a total of 664,000 square feet of NYC space. One of them, WeWork, is the fastest-growing New York firm. It ranks second among occupants of space in the city, hot on the heels of JP Morgan Chase.
Companies seeking a presence in Manhattan find co-working space a great deal because of flexibility and emerging competition. The arrangement lets them bypass expenses for areas such as restrooms and kitchens and some types of insurance. They don’t have to pick up the tab for Internet service, cleaning, build-outs, or supplies to run a front desk. They shell out for only what they need, typically a shorter occupancy timeframe and fewer square feet that what a traditional commercial lease requires. This allows companies to stay focused on their bottom line, whether that’s real estate investment or another vertical, rather than contend with asset issues.
“Originally, everybody thought of co-working space as some sort of tech incubator space… As co-working spaces evolved, it was interesting to see how different types of companies in different industries came to be open to the concept. More traditional companies may have worries about a loss of privacy or how upscale these spaces may be, but I’ve found several co-working spaces that look very exclusive where tenants also have access to the privacy they need in designated conference rooms.”
~Joan Brothers, President & Licensed Real Estate Broker, Manhattan Boutique Real Estate
Co-working chain The Yard claims that its tenants save 30 to 40 percent per person over the cost of leasing their own space. The company claims a profit margin of 40 percent. Sites earmarked for co-working are claiming lots of space. A typical site took up less than 30,000 square feet in 2013. Major developers are now grabbing between 70,000 and 150,000 square feet per project. WeWork’s project at the Brooklyn Navy Yard’s Dock 72 covers 222,000 square feet. Amenities many consider luxurious have sprouted. Tenants can look forward to perks such as a conference center and an on-site coffee shop.
Co-working is ideal for businesses looking for international stature with shared offices across the globe. It didn’t take long for corporations to realize that they can establish regional offices without being shackled to long-term leases, fixed sizes, or build-outs. A co-working arrangement permits a firm to avoid placing a lease on a balance sheet if the term is no more than a year. With this in mind, many types of real estate investors are shifting their sights to accomodate for co-working spaces
Some commercial building owners have already lost tenants to co-working companies aggressively hunting for them. Ever sensitive to changes in the city’s real estate market, brokers are now getting involved in co-working transactions.
Co-Working for Individuals
Many workers want to avoid a commute and work by themselves, away from company headquarters. However, their preferred work sites might not be their apartments. Enter co-working space for individuals. Croissant and WeWork offer spaces with stylish, comfortable décors and a community emphasis. Luxury apartment developers are increasingly adding communal work spots as amenities. The focus is an attractive area where a worker could enjoy a latte while using a laptop.
HomeWork offers a community atmosphere in which residents can exit their apartments, plunk down in a comfortable office to work, and socialize with fellow residents. Comfort and convenience rule. Individual space in a co-working community is ideal for those who want to avoid commuting but consider working from home non-productive. Free coffee, a refrigerator, soundproof booths for calls, and a few happy hours are hard to beat.
Productivity requires a willingness to move from old to new ways of working. Successful companies find ways to maximize workspace utilization while keeping employees engaged. Some New Yorkers who hate commuting find co-working spaces irresistible. They’re the tool of the moment for being productive and enjoying it, too.
Stephanie Young is the lead designer and construction manager with Denver Life Design. As an avid follower of the real estate industry, Stephanie likes to write about interesting developments and investments across the globe.