Opportunities found in alternative office spaces
The ethos of the booming tech industry and the introduction of young professionals in the workplace has reshaped office culture, and, in turn, traditional office spaces. Forward-thinking workplaces are no longer soulless, beige-colored cubicle farms, but relaxing and invigorating spaces where workers can collaborate and turn inspiration into innovation.
This desire for collaborative spaces combined with an entrepreneurial need for affordable office space has fueled the demand for co-working spaces and other flexible office solutions that help entrepreneurs get their dreams off the ground.
While so-called “virtual” office space has been around for more than a decade, enabling professionals to rent a desk with shoestring office amenities, the industry has deepened its offerings. Co-working and shared office spaces now boastfully stocked kitchens, fiber internet connections, business services like accounting or human resources, networking events and onsite mentoring. Many young professionals are turning to office-sharing websites and apps, along the lines of Airbnb, that enable them to find a more established business that will rent its extra space to them.
Bottom line: a thriving tech scene and startup culture are challenging traditional ways of doing business. As young workers establish themselves as entrepreneurs and employers, they are demanding a flexible approach to office real estate that supports the new ways they are doing business.
Young entrepreneurs are a migratory breed. In those early stages of business development, the idea of investing in a brick-and-mortar building—whether it’s buying or leasing—is not top of mind. They’ll often hold meetings at a local coffee shop, or they’ll share someone’s office space as they develop a business that’s slowly evolving.
More often than not, they’ll jump from place to place before landing in a temporary location that sometimes involves renting a room inside an existing office—or even during off hours for a retail shop or restaurant.
Bill Ukropina, managing partner of CBC Advisors in Glendale, California, describes this business approach as “nomadic,” with standard business hours evaporating due to the mobility provided by smart phones. This disregard for nine-to-five hours gives professionals the flexibility to, for example, utilize office space that is standing empty at 10 o’clock at night.
“The ‘sharing economy’ has now extended to the workplace and office market,” said Brandon Fugal, Chairman of CBC Advisors. Sharing office space has taken off “in markets across the country.”
Various office-sharing websites, such as PivotDesk, ShareDesk and LiquidSpace, make it easy for companies to add or reserve spaces in locations across the globe. Startup companies have the option to reserve a desk, an office or a conference room for an hour, a day or a month —whatever they happen to need at the time.
Not only does office sharing give young entrepreneurs a chance to gain a feel for what kind of area they like and what type of space will work for them, it gives companies an opportunity to rent out their extra space while they work to grow their business enough to fill it (or to earn some extra money when they aren’t using it). In the meantime, young professionals only have to pay for the space they need, when they need it.
As their businesses grow, though, many companies turn to co-working spaces as a semi-permanent—but still very flexible—option for their business.
Various co-working companies, like WeWork and Office Evolution, are expanding their presence across the country in response to an increasing demand for flexible workspace. Fugal believes that demand is only going to continue to grow. “This is a trend that is here to stay,” he says. “Flexibility has been a key driving force behind the success of the co-working space environment.”
WeWork, one of the fastest-growing co-working space developers in the world, creates collaborative workspaces by transforming existing buildings into havens for young entrepreneurs. Founded in 2010, the company provides services and a community where entrepreneurs can work together both physically and virtually.
“These spaces are move-in ready with amenities like ping pong tables and stocked pantries. It’s an environment that allows companies to be collaborative. Lots of different companies come in and use the space, sometimes for a month, sometimes for up to three years,” says, Barry Lewen executive managing director at CBC Advisors in New York City, who directs many of his entrepreneurial clients to WeWork.
While WeWork users skew toward younger professionals, members span generations. One person might just want a desk to work at, while other members might want a spacious suite with all the amenities. And those amenities are pretty cool. Businesses using WeWork properties have access to Wi-Fi, onsite managers and common spaces that can be used for events or business meetings. Members can also take advantage of discounts on HR services, accounting, shipping and storage and can buy into the healthcare plan.
“The thing that really works is not just the space—which is attractive and functional—it’s the community you gain and the WeWork services we provide,” says Julia Davis, WeWork head of referrals and partnerships.
Time efficiency is another key to the success of co-working spaces. It takes almost no time at all to lease collaborative work spaces. Startup entrepreneurs may be impatient with the traditional pace of commercial real estate. They are used to partnerships and deals happening quickly, while real estate contracts and investments don’t always happen fast.
Co-working spaces offer a quick solution. Members can often sign an agreement and be up and running the next day without having to purchase office equipment or furniture. And at WeWork, members can utilize any of the WeWork spaces around the world, allowing them ultimate flexibility.
So when it comes to office sharing or co-working spaces, where do real estate advisors come into the equation?
First of all, brokers may be the best people to know the available nooks and crannies of under-utilized office space in a given market. Real estate advisors who know which offices and businesses are leasing spaces are an invaluable resource for youthful startups. Brokers can also suggest to current clients that leasing an office or two in their building to a startup could benefit everyone involved.
It’s imperative to be able to provide useful knowledge and guidance and serve as a trusted resource for up-and-coming business leaders, says Ukropina. Anyone can give people market information and a great deal of material can be found online. But Ukropina says you can maintain your value by keeping a finger on the pulse of market dynamics, knowing which landlords are motivated to lease and finding creative solutions.
“The majority of the time, they’ve already done a lot of research before they contact a broker,” he says. “A broker’s value is in knowing more than what’s in the data. That’s why you hire a professional.”
Working with brokers is critical to the success of co-working firms, as well, says WeWork’s Davis. Creating dynamic partnerships with real estate brokers allows WeWork to connect with clients looking for diverse options and the desire to harness the energy that the co-working concept brings to the table.
For Barry Lewen, executive managing director of CBC Advisors’ New York City office, working with aspiring entrepreneurs is a great way to start forming relationships that can last for decades—relationships that are valuable for both the broker and the client. “It’s been an interesting learning curve for everyone involved, from the real estate side and the customer side. By interacting with these types of companies, by servicing that environment, you’re learning about the collaborative marketplace,” he says. “We can educate entrepreneurs and watch them grow as they run their companies.”
Those early relationships are pivotal because once a company has grown to a point where it’s time to settle into an office space, company leaders will contact the broker who’s helped guide them along the way. Lewen has worked with several clients who have found great success, and he can take pride in saying he knew them before their businesses took off. He frequently visits clients to maintain those important contacts, and he even plays the occasional game of ping pong on the table he bought as a gift for a client.
“It’s a healthy version of doing the right thing. At the end of the day, they need to call someone they trust,” he says. “The real estate business is still a relationship-oriented industry where face-to-face meetings and impeccable integrity still matters. I’m in the relationships business. I want to stay with those relationships from inception up through growth and success.”
Embracing the Change
Lewen has been in the real estate business for more than 30 years, working with some of the largest companies in the nation, but he’s never seen the industry affected the way it has been by the tech industry and young entrepreneurs.
Even with all of his experience, Lewen has changed the way he interacts with a new generation of real estate consumers. He says old-school brokers who are unwilling to adjust to changing attitudes about leasing could lose potential clients.
In order to stay relevant with younger executives, he says, it’s important to learn their buzzwords, understand their needs, timing, and to be flexible.
“Flexibility and agility are key to setting up shop and having the ability to grow,” says Lewen. “It’s definitely a sign of the times. Millennials and the tech industry have changed the way we do business.”
In a dynamically changing market, one thing is sure: the demand for affordable and communal office spaces will only continue to grow, and advisors who are able to let go of “how it’s always been done, ask the right questions, challenge the current economics” and stay abreast of trends and the latest tech tools will stay ahead of the curve.