From “Rent Collector” to “Service Provider”
Experts in asset management don’t typically have expertise in hospitality services, yet the experience of the end user—the day-to-day tenants that work in their buildings—is now driving decision-making for corporations seeking commercial real estate. This industry trend is the culmination of emerging ideals in the world of flex office: executives don’t need a headquarters, they need a productive workforce!
Mara Hauser, Founder & CEO of 25N Coworking, explains:
“Progressive building owners are taking a different stance when it comes to occupiers: not only do they recognize the more obvious benefits of flex office, they recognize the benefits of utilizing experts in hospitality. They’ve realized that the future of workplace is more than collecting rent, it’s about increasing the overall value of their buildings. And you just can’t do that without a hospitality experience for the end user.”
And the proof is in the numbers. JLL notes that the flexible office sector has grown by an average of 23% per year since 2010, with only a 1% annual growth rate of the overall tenant base. Real estate broker Casey Godwin, VP of Swearingen Realty Group, reports, “Corporate real estate inquiries for fewer than 20 desks, something that only flex office can competitively provide, has risen by nearly 65% year after year.”
So, are we still talking about coworking spaces versus traditional leases? In fact, the two aren’t mutually exclusive, and any building owner can shift from “rent collector” to “service provider” without overhauling their business model. How? Through mutually beneficial and sustainable coworking partnership agreements.
At this year’s FlexOffice Conference, we kicked off the conference by exploring these partnerships between coworking space operators and building owners. In a recent landlord survey by Blackstone, 67% of landlords surveyed said that they would bring in a third party to operate flexible space added to their portfolio. So how, exactly, does that happen?
Mara Hauser and Casey Godwin have identified four nontraditional agreements they’re using to bridge the gap between operators and landlords for less friction and more flexibility as the demand for flex office grows.
Shared Risk & Profitability: Management Service Agreements
One of the most comprehensive partnerships, management service agreements have become increasingly popular as hospitality models take center stage. It’s a straightforward model built into a termed contract with renewal options: the building owner provides the space, the coworking company provides the service.
Some benefits of an MSA are:
- An invested interest in profitability
- Cross-training of real estate staff and coworking space staff
- Shared amenities for the building
- Shared marketing and events
- Reciprocal tenant/member acquisitions
- Increased end-user satisfaction
Direct Support from a Coworking Company: License Agreements
Although franchising is a familiar arrangement that offers quick go-to-market potential, it’s extremely expensive, rigid, and prescriptive—this type of take-it-or-leave-it approach isn’t right for every building owner who is considering flex office. Licensing agreements, on the other hand, allow the flexibility to license some or all of a business model according to specific needs and overall goals.
Some benefits of a license agreement are:
- Lets both parties retain a degree of control
- Covers many possible business arrangements between a landlord and coworking company
- Offers an “a la carte” approach to business tools and resources
Landlord-Owned Coworking Spaces & Brands: “Powered By…” Agreements
One of the most innovative partnerships can empower a building owner to launch their own brand of coworking with less risk. A “Powered By…” agreement outlines terms that co-brand a space with ownership recognition from the coworking company, and the coworking company provides as much or as little support and service as the landlord desires.
Some benefits of a “Powered By…” agreement are:
- Landlord owns the coworking brand
- Covers many possible business arrangements between a landlord and coworking company
- Offers an “a la carte” approach to services
- The fees for coworking company services can be covered out of revenue
Experience for Sale: Consulting Agreements
The terms of a consulting agreement create a relationship that leverages “know how” without long-term commitments or responsibilities. Consulting agreements can include valuable resources like:
- Feasibility studies
- Market research
- Design/brand strategy
- Space Planning
- Operations: Process & Procedures
- Day to day accounting/finance
- Management & leadership consulting
Is a Partnership Right for You?
If you’re interested in learning more about partnership agreements and how to structure a contract, you can contact Mara Hauser at mara@25ncoworking.com or Casey Godwin at cgodwin@swearingen.com.
