CREJ - Office Properties Quarterly - September 2017
The co-working movement has arrived in Denver. WeWork, Industry and Galvanize, some of the more well-known names in the modern co-working industry, announced their arrival to Denver in 2015, 2013 and 2012, respectively. As international investor interest, commercial real estate development and office-using employment growth in Denver has prospered over the current business cycle, the co-working industry also has exploded. There are over 35 different shared office locations in Denver totaling approximately 1 million square feet as of July, according to a local news source. In addition, multiple new facilities are under development, including Industrious and The GRID, both of which are scheduled for opening before the new year. These totals more than triple reports on the footprint of co-working companies in Denver since the start of 2015. But should tenants and commercial real estate professionals expect this prevalence of co-working options to sustain – if not grow in significance and inventory – through multiple cycles? Some of the traits most commonly associated with these workplaces existed long before the term “co-working” took shape in the business world. Short-term serviced office providers first emerged in the U.S. in the 1960s, with companies like OmniOffices, Stratis Business Centers and the still-active Regus existing long before today’s co-working giants. Open and bullpen-style office plans were pioneered by private media and tech companies before the year 2000. The emphasis on collaboration, live-work-play and specialized business atmospheres offered at today’s co-working facilities have undoubtedly brought new opportunities for entrepreneurs. In the last few years we’ve seen co-working spaces emerge in Denver specifically designed with female tenants in mind, a sustainability-focused space, and even a co-working space that moonlights as a night club and art gallery. Women in Kind, founded by Virginia Santy and Melanie Ulle, is a prime example of this burgeoning revolution of co-working founded, funded and designed by women for women. Co-working spaces are tremendously useful for tenants between leases or required to have certain business groups in close proximity to a specific client. In addition to startups and freelance professionals, we’ve seen sizable companies assign teams to co-working space to work on specific projects that require separation from the larger workforce or benefit from the services and atmosphere offered by co-working providers.
The question remains: Is co-working the best option for tenants seeking a startup or collaborative work space? Not necessarily. There are benefits to business objectives and negotiating ability that growing businesses lose or see diminished when not taking up private space or utilizing the services of a tenant representation adviser. For one, it’s vital for any growing business to secure and retain propriety information and top talent. While the ability to frequently collaborate with outside parties within a co-working space can facilitate creativity and a rewarding work experience for employees, feedback from clients on the co-working experience often focuses on concerns that competitors can easily poach talent and intellectual property. Furthermore, when striving to maintain a specific organizational culture and values – something that often is a top priority for a company in a real estate transaction – outside influences presented in a shared space can be a challenge. Is it impossible to achieve these business objectives regarding talent retention, intellectual security and corporate culture at a co-working space? No. Nevertheless, these challenges are important considerations businesses must review when evaluating workplace options. There are costs when working with a tenant adviser to secure space that businesses avoid when going the co-working route. However, a tenant adviser provides a wide range of services to clients leading up to and after their client commits to a lease that co-working tenants are unable to take advantage of. These services include workforce strategy analysis to determine what location and real estate decisions are required to attract and retain top talent, reduce operating costs and foster innovation. They also serve as representation in lease negotiations to leverage the client’s position in the market for economically favorable lease terms, concessions and tenant improvements agreed to be implemented by the landlord. When represented by a tenant adviser, the representative constantly evaluates the client’s business, industry and office market to identify opportunities to scale for growth and improve efficiency by negotiating for lease restructure or expansion, or subleasing excess space to another business. Looking forward, it’s hard to bet against co-working facilities having some kind of sustained role in the Denver office market for years to come. It will be the job of commercial real estate professionals to help growing companies eliminate the gray area for when a business should utilize a co-working facility and when they should scale up to private space.