April 12, 2018 | By Luis Estrada
The Cost of Starting a Coworking Space
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March 8, 2018
With our industry continuing to grow rapidly, it’s important to understand why commercial real estate investors are turning toward Coworking.
Coworking and shared spaces have been vital for several groups of professionals, including early-stage small businesses and freelancers. From entrepreneurs running a one-man show to large companies investing in shared space, the ‘niche’ is expanding.
For CRE investors, some buildings may be especially well-suited to renting to a Coworking space or operator. A dedicated property manager already shares the skills and competencies needed to run a Coworking space.
There are fears that the big players in CRE could take over the Coworking industry in its current form. This isn’t necessarily going to be the case. The Coworking market may be valued at an estimated $5-10 billion. Impressive. But that’s not even close to 1% of the value (~$12Trillion) of the CRE industry.
Turns out, as the traditional powers in CRE invest in Coworking, they’ve adopted concepts that are effective for them and moved forward.
From an investor perspective, its vital to know that Coworking isn’t a fad. The landlords that grasp the importance of this concept have a leg up on those who dismiss it. Estimates show that by the end of 2017, there will be 14,000 Coworking spaces worldwide, with 1.2 Million people spending time working in a Coworking/shared space environment.
According to a study from NAIOP and Deskmag, the amount of spaces worldwide has grown by 240% in just the past 3 years! And the number of members in those spaces has grown by an astonishing 400% in that same time period!
And the economics of it are simple. A Coworking space, on average, can yield 2 to 3 times more revenue per square foot over a traditional space. A CRE investor can drastically increase income by converting vacancies into Coworking spaces.
Consider, a landlord renting real estate space to a Coworking operator could charge $50 per square foot. The operator can then re-lease that at potentially $100 a square foot.
Important to the CRE industry is the fact that Coworking is likely to withstand any future economic downfalls. Many companies faced needs to downsize in the recession several years back, which aided the initial growth of Coworking. So now, booming with members, shared spaces are even denser than the average office space.
More like the present. The timing to invest in Coworking is ideal now not just because of its exponential growth. The millennial generation is the largest in the US at 92 million. By the year 2030, millennials will comprise 75% of the world’s workforce.
We’re not suggesting millennials are the only ones who use shared spaces, but they’re definitely the largest chunk and the market is skewed toward them.
Not only would a CRE investor be tapping into available space that is in high demand, but investing into a percentage of the workforce that is only going to continue to grow.
What is the biggest indicator that a something is no longer a trend, but a permanent concept? When large asset holders and investment companies join the party and take note of the industry.
For example, Blackstone, the largest real estate private equity firm in the world, acquired London’s The Office Group, one of the largest Coworking and shared spaces brands in Europe. With Blackstone behind them, TOG has the financial support needed to go global.
Even when looking at buildings that are not good fits for Coworking spaces, CRE investors can certainly take ideas from Coworking such as the concept of a strong community, promoting interaction among members, and semi-social spaces within an office.
CRE professionals also should consider analyzing design aspects of Coworking spaces. They are among the most technologically advanced and progressively designed locations.
Like we said earlier, CRE isn’t going to overhaul or derail Coworking, but it can certainly feed off Coworking’s success. Based off the profitability of the Coworking and shared space industry, you could start to see joint ventures between landlords and operators.
Its possible there could be an impact also on the length of leases, as small business or entrepreneurs could lean toward shorter-term leases with Coworking as an alternative.
In the near future, you could also start to have small businesses outgrow shared spaces, and turn toward traditional CRE locations, based off thriving Coworking models.
China’s biggest Coworking brand UrWork (now Ucommune) received a $178M funding from several capital groups in Asia. The company is valued at $1.5B in US dollars, and plans to use the funding for an expansion to New York, Los Angeles, San Francisco, and London.
CRE investors aren’t in this industry for the sense of community. As we know, Coworking thrives off of it. In the big picture, this shift in the CRE landscape will lend more to making a profit over building community.
This could really become a hand in hand relationship between these two industries, with the evidence that CRE leaders are leaning toward Coworking in many facets. To learn more about how WUN can help your shared space, please click the link below.
WUN Systems is a provider of a Workspace Management Platform delivering you all the tools needed to grow a smart and connected workspace. The WUN Platform enables your technology to work intellligently together from managing leads and monthly billing to on-demand Internet and Voice services. With all the hardware, software, and essentials for building a thriving workspace, WUN’s platform helps you increase revenue, maximize productivity, and build community. WUN’s mission is to provide the blueprint for growth and efficiency in your workspace.
The #1 Workspace Management Platform for Coworking and Shared Space. From managing leads and monthly billing to on-demand Internet and voice services.
April 12, 2018 | By Luis Estrada
April 3, 2018 | By Luis Estrada