When should you start looking at a coworking space?
Initiating the search process for a coworking space can feel intimidating, it’s sort of the “this sh*t’s getting real” point. If you commit to doing a space, start your search process before you think you’re ready (or feel ready). Three reasons for starting before you feel “ready”:
- You will invariably need to make trade-offs. It’s best to get into the market to see what’s out there and what decisions you might need to make. Your vision of your space and its layout, location, amenities, etc. may not line up perfectly with market inventory.
- Related to point #1, this search might take you months depending on the inventory available in your market and the trade-offs you’re willing to make. Start early and prepare to be patient.
- Seeing actual space will trigger considerations that you won’t think of until you’re actually in the space. Things like the importance of the entrance location (call me if you need a testimonial from someone that screwed that up big time on her first space), parking, building signage, bathroom location, shared amenities, etc.
How to educate yourself on the process of finding commercial real estate?
Get familiar with the lingo: “Triplenet,” “Full-Service,” TI Dollars,” “CAM,” “Right of First First Refusal” are all terms you should understand without having to have your broker translate. 42 floors has a good e-book that will help you get up to speed.
While not many coworking spaces score retail-level locations, location is critical and there are a number of key considerations when looking for your space. I’ve created a checklist that you can print to compare spaces on your next tour. Click here to download our space search checklist. .
Accessibility – How will people get to your space?
Will your members take public transportation? Walk? Bike? Drive?
- If public transportation—are you on the most well-traveled line?
- If biking, are you on a route with good bike lanes?
- Is there bike storage in the building?
- If parking, do you have parking to offer? If so, at what price?
- Is there parking in the area? If so, how far away?
The preliminary data from the 2017 Global Workspace Association shared workspace member survey indicates that of those members of shared workspaces paying for their own membership (meaning their boss did not pick the location), 46% reported that “close to home” was the most important factor in their choice of workspace and only 9% selected “close to public transportation” as their top factor. So work with your broker to understand the potential market close to your space. Or target a high-potential market and wait for the right space to become available.
Once they get to your building, how will they *find* your space?
Picture this if you will..
You found *the* space. Gorgeous view of the skyline. Eighteen foot ceilings, brick and timber loft. It is the ultimate “creative” workspace. The windows, the light, the view, the mojo. This is IT! When people walk in, they won’t want to leave! You move in, start scheduling tours. But, they can’t find parking or the entrance, so they call, frustrated. They circle, wasting time. You realize that *you* know how to get into the building but it’s unclear to the untrained guest. You start putting screenshots of the door in your tour emails, and include a long explanation about how the entrance is not actually in the front of the building, but in the back… kind of…well… in an alley. So you hire a copywriter to find a sexier way to say “kind of in an alley.”However, your landlord doesn’t support signage. If your prospective members are lucky enough to get into the building, their trip to the third floor is still unbranded. Your members tell you they’d have more guests but the entrance is hard to find. Now that perfect coworking space is on the path to becoming the best kept secret in the city.
This story was shared by a friend who used to own a coworking space in Chicago. Where the entrance was…kind of in an alley.
So that brings us to….
Negotiate signage in your lease. This is not the kind of thing you leave to a fist-bump between brokers. Get as much signage as you possibly can. Members do not want their guests (read: their paying clients) to be frustrated at any point during the process of meeting them.
Signage to try to get:
- Front of building signage
- Door signage
- Elevator signage
- The ability to place sidewalk signs
- The ability to do hallway signage
What Amenities Are Nearby?
Yes, you serve the best local coffee in your space and you have a big refrigerator for the lunch-packers. But just like other humans, your members will want to walk out for lunch or head out for a latte for a change of pace and some Vitamin D. Within a two to three block radius, are there restaurants? Coffee shops? Retail? What is the “walking score” for your building? As part of your due diligence, map out the amenities into a three block radius.
How old is the Building?
Brick and timber loft spaces can be really sexy until you realize that brick requires tuck pointing which can only happen during business hours…and the roof needs to be replaced so that when it rains, it leaks. It leaks into your kitchen and all over your coffee equipment. And the pipes? You need to bring water in from a service—“don’t even try to filter this water,” says the landlord of a friend that used to own a coworking space in Chicago.
Type of Management
If you’re looking at Class A or B buildings, they likely have professional management companies which means there will be a service level agreement in place to ensure that your maintenance requests get addressed quickly. If you are in a Class C (meaning relatively small, no amenities, no doorman), which is often where the creative spaces are, you may have a landlord that self-manages the building and has other commitments that keep him away from the building and sometimes make him hard to reach.
Make sure you ask about the management structure and how maintenance requests are processed. If the building is managed by the landlord, get references from other tenants on his service levels and response times. Make sure he isn’t likely to be at his second home in middle of nowhere Wisconsin, with no cell phone service when the elevator stops working.
Access to Fiber Internet
Make sure to ask early in the process what the options are for Internet Service Providers in the building. If you are limited to one option and it’s not fiber, make sure to talk to other tenants about their experience with the service. It is high risk to put flexible office into a space that only supports one provider (for example Comcast or AT&T). While people go to flexible workspaces to escape loneliness, to be a part of a community, to increase their ability to focus, what they really, really want from the bottom of their souls, is for the Internet to work every moment of every day, and to be really fast. Your members will forgive a lot of things, but they will not forgive Internet outages or slow speeds.
Likelihood of Tax Increases
The landlord may not be forthcoming on this topic but make sure that you understand how the taxes flow through to you. Such as in a triple net lease, they will likely show up in your share of the CAM. Work with your broker to understand the likelihood of your building being reassessed and the taxes going up. Shared workspace operators often like neighborhoods that are adjacent to the hottest in town due to the reason they can get affordable rent. If the neighborhood is on the uptick in terms of occupancy levels and development, that could mean significant tax increases that you’ll want to plan for.
Firstly, ask your broker to get feedback on minimum/maximum lease lengths the landlord is entertaining. There are circumstances in which a sublease or shorter-term (less than 5 years) lease can work. If you are planning to do a significant build-out and your space will include a high percentage of dedicated spaces such as offices and meeting rooms, you may want to consider a longer-term lease such as 10-20 years.
So talk with your broker about market conditions and what the lease rates are likely to do over the next 10 years. Plug them into your business model along with all startup/construction costs. Make sure that you can pay back these costs before your lease is up. In this business model, you are essentially trying to get to cash flow positive by filling up your space quickly and then you are trying to pay back your construction costs to get to break-even and start making profit on the business. The more expensive your build-out and the shorter your lease, the less time you have in the profit-making window.
Number of existing dedicated spaces or % of dedicated space vs. open space
The emerging data is showing that it’s hard to make a space with a mostly open floor plan profitable. Keep an eye out for the upcoming GWA Industry Financial Study (May 2017) for data on the profitability of different product mixes and service offerings. So when you’re looking at possible locations, look for spaces that already have a high percentage of dedicated space for private/team offices and meeting rooms. Building offices will be one of your highest expenses.
Floors, ceilings, power
Take a look at the ceilings, floors, and power outlets. All are fundamental to the design of the space and are expensive to change.
Ceilings- while open ceilings can create acoustical challenges, they are all the rage. Higher ceilings can bring a modern feel and a sense of openness to a space. Drop ceilings are expensive to get rid of, usually hiding all sorts of pipes and wiring.
Floors- while hardwood or concrete floors can contribute to challenging acoustics, they are also generally considered to be sexier than carpet. That being said, if you budget for contemporary carpet squares, you can definitely modernize the feel of the space contributing to sound absorption. Link in Austin and COVO in San Francisco are two spaces that have done carpet really well.
Hopefully this list will help you stay focused as you start your search process. Again, don’t forget to download our handy checklist to use as you start your search.