Co-working space is definitely becoming the trend and is quite attractive for startup and smaller companies, considering the low costs, flexibility, short-term leases, etc. I would think if you want to renovate the space to cater to co-working, the kinds of tenants would be different than traditional ones.
How is co-working reshaping the market for office buildings?
We are looking at purchasing a number of existing office buildings. We are considering renovating the space to cater to co-working. Is co-working and shared office space a short-term fad or do they make sense for a long-term investment? Should we aim for more traditional tenants?
As a New Yorker, I can tell you that is having a massive impact here. There are over 1,500 different companies. WeWork just took an additional space. As companies grow, they are starting with offices for their staff in different cities at co-working spaces. In cases such as Amazon, they did a deal to take a significant amount of space in a WeWork facility. Firms are using less space and their employees are always traveling. My question for you is whether you are smarter to work with a known brand your first time. You also need to assess particular markets. I haven't seen much demand for co-working space in suburban office markets yet.
We are working with a number of different co-working brands and the overall demand for co-working is increasing in Shanghai. There is a lot of competition among them, so the rental you can get will often be better if you rent your building to seperate tenants. They commonly sign a 10-year contract with fixed rentals.
After years of having our team in conventional offices, we decided to transition to co-working environment. We are now 14 months in and I can tell you from experience, our team of 16 people could not be happier. Furthermore, it has had a significant cost reduction to our operational costs, which allows us to provide better employment incentives along with other important caveats. In this sector, it is important to have either the right operating partner or brand that can attract attention to your asset.