Property owners across the nation are considering how coworking tenants fit within their assets and overall portfolio.
There are many benefits to having shared space/coworking tenants. One of the most prominent is the impact a shared space provider can have on activating a building and creating a sense of community.
Coworking amenities can include common areas, craft beverage, beer and wine taps, healthy snacks and unique community spaces, which can serve as an extension to the creative community spaces that already exist in a property.
Some are also sophisticated operators who partner with landlords to host regular events and community gatherings that create engagement and excitement for everyone in the building.
Often, coworking tenants will share these amenities and event invites with other employees at the property, which can help create the feeling of community that today’s companies are seeking within their office property. These shared resources support a collaborative work environment, and can also support talent recruitment and retention for a building’s tenants.
Factors Worth Thought
There are several key considerations that today’s landlords and property owners must consider as they partner with shared space providers.
• Fit: As with all tenants, it’s important to ensure that a shared space/coworking company being added to a building is the right fit for that specific environment. At KBS, we are always carefully evaluating the local dynamics of each market, each asset, and the surrounding demographics in the area to ensure that our coworking/shared space providers will perform well and support strong growth within our property.
• Lease Terms: Detailed underwriting is also a very crucial component that landlords and property owners will need to consider. This includes securitization of the lease to ensure a consistent income stream.
• Portfolio Diversification: It is also essential to continuously evaluate tenant categories and ensure that no one category is too large a percentage of the whole. At KBS, we are diligent about evaluating these percentages within each asset, each market, and each fund. Through this strategy, we ensure that our portfolio remains well-diversified with a strong mix of tenants—a strategy that enables us to maintain high performance for the long term.
• Market Demand: Naturally, today’s property owners and landlords must consider the density and saturation within a market as it pertains to shared space providers.
Competitive Positioning
In markets like Los Angeles and New York, there may be coworking spaces in nearly every building. These are dense markets that can support that level of space.
By partnering with coworking tenants in markets that are less dense, or not overly saturated with shared space, today’s landlords can often harness a strong opportunity for competitive positioning.
For example, KBS recently leased a 53,000-square-foot space to a national coworking provider in our Legacy Town Center project in Dallas. The Dallas market is rapidly expanding, yet it is less dense than other major metros across the U.S. and is as saturated with coworking space, making the addition of this new tenant a strategic advantage for that asset.
Shared space and coworking providers can deliver flexibility, energy, and additional amenities to office assets, and, given the appropriate considerations, can be excellent partners for property owners and can deliver tremendous value to a building.
Merz is a senior vice president and asset manager for KBS Realty Advisors.
