Is a Joint Venture the Best Approach to Coworking for Owners?
The Benefits of a Joint Venture Approach to Owning and Operating Coworking Spaces
There are currently over 10,000 coworking spaces around the globe and both landlords and building owners are becoming increasingly interested in the coworking and flex space industry. There are great opportunities for operators with the right skill set and experience to partner with landlords. WeWork has built their empires with this strategy, dubbing it an “asset light” approach. Here are a few benefits and precautions you should take if you are considering a joint venture regarding coworking.
Why A Joint Approach Benefits Both Parties
Coworking Operator Advantages:
- The capital needed to launch the coworking space can be shared with the building owner
- With less risk, the operator can obtain financing easier which can result in a better fit out and enhances operations
- With no residual obligations or personal guarantees, the impact of a failed operation is lesser.
- If the coworking space is a success, the owner will see a higher return on the investment than with market rent
- An owner can build in flexibility, allowing for changes to the property with short notice if an alternative opportunity presents itself
- Landlords can boost their property profiles for location and leverage this to attract other tenants
- Larger landlords experiencing successful relationships with operators can create relationships and provide for opportunities to introduce coworking into more of the portfolio
- Landlords can rely on the coworking operator to run the day-to-day operations and not have to deal with the learning curve of a different business.
How to Establish a Partnership
First, you need to find a location that is on the market or even one that is off-market and figure out who the owner is. Make it easy for a landlord to understand what you are proposing. A real estate agent may not expect this kind of offer, but they are obliged to pass on any offers to their client so you should have all the paperwork prepared. A simple, comprehensive spreadsheet outlining set-up costs along with profit, cash flow and loss projections for the first three years are crucial.
Once you have picked the ideal location and you have a building owner open to a joint venture arrangement, you should be able to offer the landlord between 25-50 percent of the net profits while significantly reducing your capital expenses and start-up cost.
Additional benefits to building owners are also starting to be seen in the refinancing and sale of assets with a coworking and flex space component. Studies by JLL and CBRE suggest that office buildings with a coworking/flex space component of less than 30% of total space are receiving more interest from buyers and resulting in higher sale prices. Lenders are also providing additional value in their analysis if buildings have a collaborative workspace component.
Whether or not a joint venture is the best approach will ultimately be an individual decision for each property owner, but unless a landlord has the time, money and deep pockets to learn the skills required to run a new line of business more focused on hospitality and services than price per square foot, partnering with existing, well-respected operators is certainly an avenue to strongly consider.
Successful Coworking Venture With Proven Results
SharedSpace (www.sharedspaceatl.com), is a regional coworking business focused on creating modern, professional, and energetic work environments to stimulate the creativity and productivity of entrepreneurial businesses and their teams! Please don’t hesitate to reach out if your business is looking for creative opportunities to reinvigorate your workforce and brand with a modern coworking environment like SharedSpace, or if you are a property owner and are interested in partnering with us.