All Forum Posts by: Craig Baute

Hotels have often been management contracts between the actual property owner and then the operator that runs the business. They generally split the profit but it let's both sides operate within their realm of expertise. The property owner has the property for steady returns but shares some risk while the hotel operator focuses on marketing and daily operations while not worrying about being so conservative on their locations because they aren't on the hook for leases. It allows hotel operators to expand quickly and property owners to more confidently attract hotel operators to run their buildings. 

Basically, these buildings are rarely ever empty so it's a win for property owners.

Has anyone had experience with a similar partnership between property owners and coworking operators?

If it's in a great location with 10,000 square feet then you have several options. I'm coming at this from a different angle as a coworking space operator for the last 10 years. I have seen several clients turn 10,000 SF into office spaces with a coworking element. Some spaces also turn their spots in JVs with regional coworking operators. It usually fits the zoning code and is fairly easy to retrofit from retail to coworking. 

I recently did a complete demo for a 7500 SF space between three retail units and combined them into one coworking space. It cost around $290,000 for the building, demo, buildout, HVAC, furniture, everything. It's held up during COVID and it's still generating $25k a month in revenue and has room to grow. The traditional LT lease on it is $14+7NNN. Overall, it's in an undesirable back end of a strip mall and sat empty for years.

Basically, if you're willing to be a little more entrepreneurial but want to reuse a lot of what you have then I think coworking is a good option. By doing a partnership you don't have to do it yourself.

Hey @Kristina Tea, if it's an retail, office, or open concept then you could partner with a local coworking operator through a management contract. Coworking is struggeling right now, but it will blow up in 6 months or so and it will be fairly easy for you to add it only a few thousand square feet through a partnership.

If you go to CREcoworking.com then you'll get a helpful breakdown of costs with expenses, TI, etc. It's worth checking out as an option.

Hey Maxine,

You are making the right first steps for starting a coworking space. I'd first ask you what your goals are for the space and if you own the space. There are a few different options for coworking goals that people have:

• 1. They want to generate the most profit possible on a monthly basis
• 2. They want the coworking space to be a cool side hustle that doesn't lose money, but as long as it generates a $1000 to $5000 a month then we're good.
• 3. The person owns the building and they want the coworking space to be a placeholder business that is neat, but it just needs to cover all expenses. Eventually, the return is by selling the building in a few years.
• 4. They want to do something cool for the neighborhood. It can be a loss leader, but it has other goals than just money.
• Your goals to determine the size of your space, how much you should invest in the space, and how you should design and prelease the space.

Hey guys,

I have owned and opereated coworking chains for over 10 years and I've tested out a lot of the coworking software out there.

Proximity Space - Love it and great if you need access control for your doors. It's free and included.

This is my handsdown favorite space for coworking locations that need access control and are under 12,000 SF. I just added this to a coworking location in Logan Square in Chicago. They are always adding new advanced features for conference room books, corporate memberships, integrations to Unifi wifi, door greetings, and membership profiles. They are building solutions fast for the coworking world. Proximity is only $99 a month.

OfficeRnD - Love it

I use this for my Denver spaces because I don't need door access control and it's slight cheaper than Proximity. They pretty much have all of the same features but access control isn't built in natively.

Really these two are interchangeable.

Optix - Way too expensive and limited features

It's pretty and mobile first, but it won't do everything you need it to. Plus, it's 3x the cost of the more feature rich Proximity and OfficeRnD

Ignore everything else

There are about half a dozen players out there including Satelite, which is good but there are betters out there, WUN, which is super expensive and overly complicated, Pickspace, which is fine but not great, etc.If your space is under 12,000 SF just consider these two. If it's bigger then you should still consider these two, but there might be others that you should look at as well.

For Wifi, just because this always comes up

Use Unifi for spaces 4,000 SF to 40,000+

For less than that you can use Orbi

Hey @Don Thompson,

I've been a coworking space operator and consultant for over 10 years. I have chains in Colorado and Chicago under the Creative Density and Second Shift brand. I would be happy to answer some of your questions.

To your main question - Yes there is a possibility for arbitrage. It's just not as easy as most people hope for. If you are in a city with more than 250,000 then it's likely that you are going to be competing with places that have spent A LOT of money on TI. There is greater opportunity in the suburbs or smaller cities where office builds are boring or dated.

In order to make arbitrage, you need to make the space stand out. This doesn't mean it has to have expensive furniture, but it needs to have a brand and an identity. Chopping up an 11,000 SF into 40 offices will just leave you with 40 offices that you'll rent for cheap rates and maybe make $3,000 a month with a lot of risks. If you brand the space and make it cool and functional to your target audience then you can have a sticky membership base and make $10,000 a month.

As a consultant, the biggest mistakes I see people make are:

1)The offices aren't the right size. This leaves too few of offices that are too big, or too small of offices where if the wall was just over 1 foot then they could charge 30 to 50% more rent.

2) Wrong size furniture. Furniture is your biggest expense and getting it wrong is painful.

3) Not understand the real target audience. Too often people read the national press and just mimic WeWork's model. That's not the best way to go unless you want to compete against them. Your audience might be remote workers, one-person companies, small companies with 10 employees in the suburbs, or satellite teams working for large companies. They all have slightly different needs.

@Jason Turgeon and @David Short
Congrats on the space. I have been a coworking space operator for over 10 years with chains in Denver and Chicago.  I love the size of a 12,000 SF space. It's my general rule of thumb for spaces that can be opereatored by one staff member and feel intimate. 

David, I would have recommended different square footage to you based on my coworking knowledge of the Indianapolis area and the competitive environment. If you are still able to make some adjustments, I would lower your coworking size to 1,500 to 2,000 SF depending on if it's attached to your 1,4000 SF open kitchen area. After that I would probably split the rest of the space to offices ranging from 60 SF to 140 SF with a few larger ones. That's where the general trend is going. The fine tuning of the numbers depend on a coworking feasibility study, which is usually only $2500 and takes about 2 weeks. 

Hey Oliver,

Partnerships between property owners and coworking operators is starting to become more common. At DenSwap we started to have a lot of conversations with landlords looking to do operation management contracts with coworking chains and we basically learned that most coworking chains that have 5 locations plus usually have at least one location that is some sort of a partnership. There are lot of different ways that coworking operators and landlords can work out deals but you can get a good sense for which one is best by going to www.CREcoworking.com. It actually lays out different ways you space could add coworking.

The most important things for you to consider:

1) What type of people are around your location? Bascailly, would it make a good location for an experienced operator and who are the target audience. (Get a coworking feasibility study done to help you)

2) What type of coworking space are you looking to create

3) How much money, time, and effort are you looking to put in. There are different partnership models that fit the entiree spectrum.

I recommend you check out a webinar being put on by my partners and I at DenSwap where we discuss property owner partnerships with coworking operators. Here is a link to it.

Hey Rudy, I operate 5 coworking spaces in Denver, Colorado, and Chicago and have done so for over 10 years. I mostly do feasibility studies for real estate owners like yourself through my company DenSwap.com. I have a few pieces of advice and tools that I think will help you out.Chicago is a great coworking market and the suburbs are underserved based on my research. You can talk to the crew at ChicagoCoworks.org to advice from local experts.

First, you can find a sample coworking profit and loss report that I created for a space that is 6,800 SF here. You'll find a breakdown of the number of offices, the size of the offices, cost for furniture, etc. You also get a realistic pre-COVID estimate of costs, revenue, etc after a year of being open.

For landlords and property owners that want to add coworking to their spaces there are five general ways; traditional long-term lease with an operator, joint-venture, management contract, franchise, or start your own. Here is a good calculator that will break down the cost and revenue share of each model. This tool will break-down TI requirements, free rent expected for each coworking model, risks, time, and explaining the pluses and minuses of each coworking model for landlords.

Generally, a coworking space under 5000 square feet is going to be difficult to run unless you plan on operating it yourself.

I highly recommend you get some sort of a feasibility study done. Not all spaces can become coworking spaces and a feasibility report, even for $1250, is a smart choice. Too often people think they can build it and they will come. Not anymore. Study your competitor, study the demographics of the area, and listen to experienced people.

You will need to build out some offices. My general rule of thumb is to build out enough offices to cover your total rent costs for the entire building. Don't build out too many though because it damages the culture.

I could go on...