For Tenants: Should I do Coworking or Lease Direct?
Updated: Mar 8, 2020
Users of office space from both the coworking and direct lease user groups are often unaware of the advantages offered by the other option. Typically folks tend to think this conversation revolves around size, but there are other variables at play here. As a tenant rep, I did direct leases for large and small companies and as a coworking provider we did deals from sole proprietors to enterprise users. Here are just a few things to consider before making this decision:
People tend to think that if you need flexibility you have to thinking about coworking. In general, this is is true. Coworking offers flexibility on lease term, size and services. In some cases, users like the flexibility of visiting other cities or even being able to move from location to location within the same city. While coworking certainly holds the advantage here, for some companies flexibility is about growth and many of the best coworking locations are full or will be full by the time you're ready to grow. Coworking also tends to be located in tight markets where vacancy even direct is hard to find. Users looking to scale with a clearer picture of growth, might at times be better off taking a direct lease with fixed expansion options that give them control over their growth in a hot market.
One of the most common statements from direct users when confronted with coworking options is the concern around branding. Corporate brand and culture are certainly vital to recruitment, retention and business development and having your own space has an element of stability and gives you more control around the brand. However, coworking facilities (good ones) come with lively community team, buzz and spontaneous networking and engagement. Coworking companies also tend to spend a lot more money on the space than direct users choose to spend. Having a nicer space with "free" energy can at times be leveraged to lure the right kinds of talent and customers.
This is the big one! Coworking members cannot believe the costs behind the total rent commitments (5-10 years of lease term), number of vendors (architect, furniture vendor, contractor, project manager etc.) and lead time required (9-12 months of preparation and construction time) to do direct deals with landlords. From the other side, direct users can't believe the dollar per square foot numbers and density layouts that burden the coworking members. The truth is that costs can often be a lot closer than either side thinks. Making the correct decision in this regard is VERY RARELY due to any dollar per square foot decision.
Users of commercial office space that operate businesses need to correctly assess the potential levels of disruption ahead for the company before making any sort of cost decision for real estate. Companies can leverage flexibility, grow their brands and optimize for costs in both coworking and direct lease scenarios. If you are coming close to this type of decision you should be (at the very least) talking to an Advisor, and if they are NOT showing direct AND coworking options, then they are not truly offering the full benefit of perspective for your company.