Is Miami Shared Work Space Only for Startups? Experts Respond.
Is Miami Shared Work Space Only for Startups? Experts Respond.
Miami shared work space is the city’s soup du jour, but is it only for the entrepreneurs among us? Don’t take our word for it! We asked two of the real estate industry’s top professionals who enlightened us with their wisdom on a range of topics. Read on for the lowdown on who coworking makes sense for and why large companies are considering it more and more, to the opportunities presented to business owners in Miami shared work space if a recession hits.
In our article this month you’ll hear from Lance Benson, MCR, SLCR, LEED AP, an Executive Managing Director at Newmark Knight Frank and Andrew Trench, Managing Director of Office Brokerage Services at Cushman Wakefield.
Q: When should business owners consider renting shared work space or coworking as an option?
Miami shared work space is great solution for all size companies that are seeking flexibility and a sense of community. Take attorneys for example, those who have their own practice whether it be wealth planning or personal injury. Perhaps they have a smaller footprint and they want to have the feeling that they are bigger than they really are without having to bear that expense. One of the benefits for a user with a smaller foot print to use a coworking center like Quest Workspaces is that you get to be in a Class A building where there otherwise may not be space in your size range. The centers are not branded as Quest, per se, so if I’m walking in, I don’t know if you are 3 people or 30+ people. The visitor will go to the front desk and naturally assume that the receptionist works for you.
There’s another group of occupants who are the large multinational companies. They’re considering Miami shared workspace as an option when they’re looking at their satellite offices and their footprint nationally. Whereas 20 years ago they might have looked to lease direct office space for 5 to 15 people, now they’re considering shared work spaces as a top option. Instead of them having to sign a 5 year lease term and figure out how to do the wiring, cabling, internet service, and rent a copier for 5 people, they are choosing a flexible co-working solution like Quest so the space can meet the needs of the company on demand.
There are also many business service users, entrepreneurs, and small business owners who benefit from the community aspect of the Quest. This way, they can meet and network with the community to build their businesses and expand their networks.
Coworking gives small business the opportunity to look bigger without having to commit to a 5 to 10 year lease or pay 45 dollars per square foot. But it’s not just for small companies anymore. There are several drivers that are going to cause new tenants, larger tenants to move their headquarters down here.
While the state still has a ways to go with incentive programs that compel larger companies to do so, it seems that things are definitely going in that direction, which can only benefit the large multinational company that are looking to gain exposure to a rapidly growing market like Miami.
Q: Is Miami really the best place for a business that wants to grow? How do you see Miami shared work space vs. other markets that you deal with?
The economy in Miami is pretty stellar. Miami is in many ways a very entrepreneurial city. The strength of our tourism industry presents opportunities for service businesses. If you look at the reports as far as cities for millennials to live in, it’s very attractive.
Look at the quality of life that Miami can offer you, as well as the lack of income tax, and the connectivity to central and South American markets and even to European markets. And all this at rents that even at their peaks are half of what buildings in Manhattan are getting. These are some of the forces that Miami has going for it that are going to drive new to market tenants here (NY to Miami, San Francisco to Miami, etc.)
Spafinder, as an example, uprooted their whole company and moved from NY to Miami and has been very successful here. Very responsible builders like Hines are about to build additional Class A office supply down here as well. Some will pursue virtual offices at first which may eventually lead to later renting a full, more permanent Miami shared work space.
Q: But what if a recession hits – what should business owners know about Miami shared work space in stormy weather so to speak?
2007 was the most unprecedented down market in our lifetime. The larger multinational companies, like Hewlett Packard who for years had 50k square feet of space in Miami, basically consolidated down to little or nothing, 10k square feet or so. Yet I did see growth in some areas we weren’t expecting, such as healthcare and healthcare management, which presented opportunities for entrepreneurs who were ready to take advantage them.
Rents came down in varying percentages depending on the submarket, but not at the extremes of some other major markets. In comparison to some of the higher rent cities such as NYC or San Francisco, the impact was less for Miami. In those times, rents may have gone down 50 bucks a foot on Park Avenue whereas today they have escalated back up to 100 bucks per foot. And before the recession they were at 90 bucks a foot.
In contrast, Miami’s rent swings were not as great, from low to mid 40s per square foot, falling to the upper 30s per square foot and today back up mid to upper 40s per square foot as an example.. So the differential is meaningful but not as substantial as you would see in other places.
The other positive attribute Miami’s commercial real estate market is that we have a lot of institutional investors such as TIA-CREF, Allianz, big money REITs and pension funds. These institutions hold a substantial amount of assets in South Florida, and their holding power is better than in markets where you have more local ownership or smaller individual owners or family money owned properties. That makes it more stable.
The thing we did see in the last recessionary period was people getting laid off and looking at becoming entrepreneurs. They were kind of forced to do it. So demand for coworking space actually grew during that period of time.
We are undergoing a little bit of a correction in residential real estate at the moment, actually. There was a ton of multifamily property built in downtown and Brickell that are starting to see a correction on it right now. So you’re getting Zillow alerts that home owner prices are dropping daily.
I don’t see it happening in the office market. Office leasing is in a very healthy place because there hasn’t been huge development over the last 10 years. So we’re not worried about being left with huge blocks of spaces that we can’t rent. The demand is still very strong.
Q: Do you think coworking is just some “entrepreneur thing” or do you see it as an option for a serious business?
More and more owners are being more receptive and in fact encouraging having co-working and shared work space in their building. The shared workspace environment gives the smaller user an opportunity to get into a building that in some cases they wouldn’t be able to get into. There are people who would want to be in the building because they want to be around the bigger users. I think demand is only going to increase in time.
This greatly depends on state tax incentives and grants. If we can pitch to a company out of Atlanta who has their headquarters there that you can get a tax benefit out of being here or the state will subsidize your move or construction of a headquarters, that’s a huge motivator for a large company. Markets such as Atlanta and Charlotte have done this before successfully and look at all the giant corporations that call those places home now.
We’ve seen coworking to be almost a toe in the water to test Miami and see how it works. Spotify, for example, tried it earlier this year. It provides these larger companies a great opportunity to test Miami out (if maybe they are uncertain about being in Miami). I think well run executive centers like Quest could be a great opportunity for those firms. I do think it works well for large companies to “beta test” the city using Miami shared work space and see how it works for them
Summing it up: What the experts say about Miami shared work space
You heard it from the credible experts, whether a good or bad economy, the coworking trend is here to stay. And it’s not just for entrepreneurs. Economic and political factors are supporting the growth of Miami shared work space facilities and it’s starting to make more sense for companies of all sizes nationwide.
Agree or disagree? Let us know in the comments below.
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