Why “We” Work & Coworking Spaces Don’t
Shane Callahan – October 18, 2019
Coworking has seen a recent rise in popularity, giving companies flexible options and modern amenities. WeWork, IWG (Spaces and Regus), Techspace & Knotel etc., have become popular locations for companies as they look to grow, downsize or determine the firm’s future headcount. These spaces are also popular because they are seen to help attract and retain millennial and genZ employees with luxury amenities and modern build outs. Small Business Labs projects that 26,000 coworking spaces will foster 3.8 million members in 2020. The coworking industry boasts a 41% compounded annual growth rate as new, large locations continue to develop across the globe.
It’s easy to see why so many new companies have adopted this new style of officing, but there is more than meets the eye in coworking spaces. Don’t let the Monte Carlo fallacy fool you into thinking that this office trend is your best option.
Real estate is the second highest cost for companies (behind recruiting) and firms are doing everything they can to find and retain talent. The Bureau of Labor Statistics reported unemployment at 3.5% in September 2019, so it’s no surprise why finding top talent is difficult. Studies have shown that turnover on entry level roles costs approximately 50% of base salary. When a new employee walks out the door, thousands of dollars go with them.
Coworking spaces provide a millennial-friendly atmosphere with numerous amenities: lots of glass and open floor plans to boost collaboration, fancy coffee bars and happy hours. On paper, it sounds like a great way to attract new young hires, however it exposes the firm to privacy concerns via the community internet network, or even with information being floated around a communal conference room.
More importantly, it affects the overall culture of the firm. Yes, open floor plans and see through doors have helped boost efficiency and help teams work together, but younger generations, like their predecessors, value having their own workspaces and a sense of a “home base” while working. When a company has its own office space, it can establish a true identity. This allow a company to express their culture, will drive better candidates for recruiting, and increase employee retention. Finding a permanent space may seem overwhelming, but the benefits far outweigh the difficulties of the unknown.
Whitebox prides itself in a boots-on-the-ground approach and knowing the DFW market better than anyone else. This allows us to help our clients explore their options and find the best office of any size: no deal too big or too small. Our team has over 65 years of experience finding tenants the right space to call home. Paired with our project management team, we can provide ultimate customization. Whitebox allows your firm to build an office that fulfills your culture and helps you retain talent.
Our tenant representation services come with no charge to our clients and allows us to work for you with no conflict of interest with landlords or buildings. We view ourselves as an extension of your company. With our service-oriented approach, we don’t treat our clients like just another transaction. We’re with you for the long haul.
Engaging with a large coworking firm may come with flashy perks and free handouts, but it fails to provide a long-term business impact for your firm. WeWork is known to offer free beer to tenants, but as we all know there is no such thing as a free lunch, let alone a “free beer”.
How do coworking companies offer these amazing benefits? Simply put, the tenants are paying around double market value in rent. Even with companies paying these high rates and spending $2 billion over the last two years, WeWork has failed to show investors how they plan to sustain profitability moving forward. In fact, WeWork was recently downgraded to CCC+ by Fitch Rating’s.
In commercial real estate, property owners evaluate tenants’ credibility. If there is a question that a business cannot fufill their lease obligation, landlords typically ask for higher security deposits and implement stricter lease guarantees. This would explain why there has been discussion of WeWork paying a hefty security deposit on their most recent lease, a cost that will in turn be passed through to the companies occupy the coworking space.
At Whitebox, we don’t just help our clients get good deals and find spaces with flexible lease terms. We help companies that expect future growth to negotiate expansion options, right of first refusal and right of first offer into the language of their lease. At the same time, we have been successful assisting companies with any future uncertainties receive termination clauses and even find landlords with low disposition costs in case they need to move into smaller space. In addition, Whitebox has an 87% success rate in finding a sublessee for our clients’ spaces in these contractionary events. While coworking spaces do provide firms with a sense of flexibility, this added benefit ultimately ends up costing more. Using a tenant rep broker to assist with your real estate needs cost you nothing.
Instead of following the latest office fad and using coworking space with uncertainty issues, turn to a hyper-active, service-oriented tenant rep at Whitebox to help with your real estate needs. We will not treat you as needed cash flow to appease investors. Instead, we view ourselves as an extension of your company and will be with you every step of the way.