Is a Multi-Tennent Office Space a Good Idea Now?

Question

At the beginning of COVID I started a new job in sales covering the Southeast. The main goal of the position is to be on the road and in front of customers but these days, that's the exception more than the rule. Now I work out of a home office with a toddler and soon to be a newborn (due on Nov 17th). I looked around for a small, single office space that I could rent cheap to get me out of the house and actually get some work done but they don't seem to exist in my area. This would be in Griffin, GA. I've found a few businesses that would rent a "spare room" but there's really nothing in my area for people in my position. I called some local property management companies and commercial realtors and all said about the same thing, "I don't have anything like that but I wish someone would open it. I get calls from people looking for a single office all the time." My thought is that with so many people being forced to work from home, many either don't have the space for a home office, or just can't get anything done with kids running around. I know there's a market but will this market be temporary?

Griffin is not a major metro but it's growing commercially and industrially and holds enough of an economy to justify office space and a viable investment on the larger scale. I'm just wondering about the small scale. My only issues is that old phrase "If it's such a good idea, then why hasn't someone already done it?" It works in Atlanta but can it scale down into smaller markets? I would only need to fill 5-10 vacancies based on the buildings I've looked at, and the local office rent would most likely fall between $300 and $500 per unit which would make them more than profitable in the current state of things. But being that we're moving towards a correction and eventually going to come out of the COVID situation, is this justifiable? Anyone out there with some office space experience in a "smaller town", feel free to give your two cents. Thanks in advance!

Keywords: wework, communal office, shared space, micro-office, micro-lease, regus, flex space

Tyler Hardy · Answer

@John Driftmier that link and article are great helps! Thanks for the info!

Bob Langworthy · Answer

@Tyler Hardy, I own a small office building in Brunswick, ME population 20,000. Here's some info:

1) Prior to purchasing my 4-office building, I rented space in a 15-office building. We had one receptionist for the building and most of the business were 1 or 2 people companies. There were a couple sales reps for a food company as well.

2) I bought my building 4 years ago and had no trouble finding tenants. One tenant left in April of this year due to the impact of COVID on her business. I had multiple great applications for the office space and moved a quality tenant in on July 1.

3) I cover all utilities except phone (most of us use VOIP). I do this because I want it to be very easy for a tenant to move in and just pay the one monthly bill. This would be particularly beneficial for someone looking for their first office. It's a really big deal for the micro-business to get their first brick and mortar office and simplifying that process for them makes them more likely to select your building.

4) Dedicated off-street parking and every office has its own entrance. There's a severe shortage of parking in our small town so this was huge. I have enough parking that in addition to the four offices, I lease 6 parking spots to an area business.

5) Co-working space is a different animal than what I am doing and may be a good set up for you. It takes more work to manage co-working space, however, and would come with more upfront costs, furniture being the big one.

6) In addition to my accounting practice, I had another tenant lined up prior to closing. That relieved a lot of pressure.

7) Regardless of what the economy looks like post-COVID, I believe that the type of small office space you are describing will always be in demand for exactly the reason that you are looking for it.

Hope this helps,

John Driftmier · Answer

Most coworking spaces are moving towards a New Shared setup, which is a mix of ~70% office suites (1-3 person offices, maybe a few 4 or 6-person offices if the market allows) and 30% shared desk space. The shared desks create the communal atmosphere most work-from-home employees are looking for, and then your office space drives most of your revenue.

Suburban coworking/flex space is good right now. My partner opened up a 8,000sqft coworking space back at the beginning of 2020 on an outer ring suburb outside of Denver - it's past even the fringes of the metro area - and it's been full and profitable even through the pandemic. Companies are shifting to WFH, reducing their RE footprint, and shifting away from large downtown campuses, and people like having a community outside their immediate home/work circles they can go to in their local neighborhood. Griffin has a population of 23K? If the average household income of the zip code is in the 60-75K range I'd say it's worth a closer look. If the income is more like 30-40K you might not have enough flex space workers to support it.

This is the article we wrote with some of the numbers involved https://www.denswap.com/new-buyers/how-to-make-money-with-your-first-coworking-space/ and we use https://www.coworkingheatmap.com for general neighborhood research - I'm not seeing any competing spaces anywhere around Griffin.

Greg Dickerson · Answer

This has been a popular trend in many areas the last few years but Every market is different. You need to test the market for demand. Check LoopNet, Craigslist, MLS for space for rent, Call around to commercial brokers and property managers to see if they have anyone  looking for this type of space. You can also place ads in Craigslist and set up a survey and post on LinkedIn and Facebook to see if there is enough interest.

Bennet Sebastian · Answer

@John Acheson in my market (Orlando) office vacancies have increased this year but asking prices still remain high. It's only a matter of time before prices come down and I'm confident that they will.

John Acheson · Answer

if the 1st step to investing is

"buy low"

can office go any lower?

Joe Splitrock · Answer

@Tyler Hardy it is a wonderful idea. So wonderful that a company called WeWork made a multi billion dollar business out of exactly this. Others are doing the same thing. This concept has been around for ten years and there are tons of options out there. They range from dedicated office, to renting an office for an hour, week or month. They usually include shared spaces for bathroom, conference rooms and break rooms.

Rebecca Knox · Answer

@Matt Maurice just opened MKE CoWork in West Allis, WI which is an office share space--He might be a good resource to ask.

Brock Mogensen · Answer

Leasing at an office building I own has slowed slightly over the past few months but there is still activity.  I like the idea of leasing smaller offices to individual users.  We are trying to do this with a few of our smaller units.  I think overall office space in suburban areas will bounce back in the next few years.  I think lots of people are starting to get sick of WFH.

Jeff Stein · Answer

I think you have a great idea! This might be because this I what I am doing in the Milwaukee Suburbs. I have one 20,000 sqft office, putting in an offer for another this month and plan to build another in 1-2 years. Feel free to PM me and I would be happy to provide you more specifics

Is a Multi-Tennent Office Space a Good Idea Now?

Most Popular Reply