The good news for asset managers and developers is that there is now a mechanism to earn a higher price per square foot for office workspace. Coworking space, which may be considered the next real estate bubble, presents a simple way for asset managers and developers to offer new amenities and attract new tenants. However, just like every yin has a yang, the brand and the profitability must be masterfully intertwined for the business model to work.
Making Office Workspace More Profitable
Office Workspace Brand
With the coworking space explosion, there’s no shortage of supply for asset managers and developers to choose from. Every office workspace has a brand, a buzz, a story. Some offer a higher level of service while others pride themselves on having the most vibrant community or the best amenities. Understanding the office workspace’s brand requires subjective thinking. For example, some coworking spaces allow pets while they are strictly prohibited in others. An asset manager must determine if the brand’s energy is going to attract the right tenants into your building.
Office Workspace Business Model
On the other hand, at the end of the day the office workspace model needs to be sustainable. Asset managers can’t lose sight of the fact that they have to underwrite the space, appeasing all shareholders involved. The bank needs to see the return on investment, and there are corporate governances to abide by. Asset managers and developers should ask themselves what the buzz looks like at the end of the day in terms of a sustainable business model. Is it efficient? Does it materialize the right results? Is it being monetized in the best way possible? All factors will answer the question of whether a coworking space would be a valuable asset that brings profitability and accretive value or instead a financial liability for your building.
The Bottom Line
The yin and the yang must be balanced. Going by the buzz only is risky because at the end of the day, the office workspace must make business sense. Yet judging the fit just by the numbers also has its disadvantages. Even if the bottom line made sense, you wouldn’t want the wrong tenants circulating in your building. It is ideal to select the office workspace that presents the best possible combination of the two.
As an example, Quest Workspaces is a provider of shared office space solutions in New York and Florida whose solutions include meeting rooms, virtual offices, coworking spaces, and private offices. Asset managers and developers typically chose this coworking operator for its unique Quester community and high class clientele. On the other hand, it’s not just the tenants that have appeal. Office workspace industry veteran Laura Kozelouzek has a track record of success in monetizing these types of assets, both for her own enterprise at present and in the past as a critical part of the management team that grew the HQ/Regus brand to what it is today.
We are curious to hear what asset managers and developers feel is the biggest challenge when selecting coworking operators. Please comment below and offer us your thoughts.
