Should Real Estate Investors Operate Their Own Co-Working Spaces?

There is an excellent quote in a Miami BisNow article, Watch Your Back, WeWork: Landlords Move To Cut Out Middleman, Offer Coworking Themselves, which has an excellent quote from Angelo Bianco of Crocker Partners that frames many thoughts we’ve hear from local Philadelphia area real estate investors. Which is, why shouldn’t they get into co-working spaces themselves?

“Co-working is a huge change in the market, but it’s not what it appears to be,” Crocker Partners Managing Partner Angelo Bianco said. “It’s just subleasing space. You have to be careful when you say that’s absorbed; it increases competition for small suites.”

Bianco said that in some of Crocker’s buildings, “We hire a manager to have our own operated co-working location. [Co-working companies] were smarter than property owners. Now, we’re going to steal their ideas. Why would we allow somebody to make a profit on our space?”

While it sounds excellent, as a real estate investor, to be a landlord and generate some additional income by running your own co-working space there are a number of things to consider before you make the decision to go ahead. There are a number of tasks that have to be handled before you could consistently expect to run a co-working space, especially if running an office business is outside your normal business operations.

  • Ordering stationery
  • Dealing with Complaints and Queries About the Space
  • Handling and Scheduling Cleaners
  • Supervising and Monitoring the Work of Administrative Staff
  • Managing Office Budgets
  • Handling Staff, Suppliers & Clients

Alex Hillman, co-founder of Philadelphia’s Indy Hall, has some excellent insights into the costs associated with starting your own co-working space in his article, HOW MUCH DOES IT COST TO START A COWORKING SPACE?

Your start-up costs will vary depending on some of the following things:

  • The size of your initial & anticipated community
  • The needs of your initial & anticipated community
  • Local real-estate conditions
  • Available real-estate connections
  • Costs to consider, with examples of what we pay (or paid) in Philadelphia:

Our initial 1800 square foot Indy Hall $6,000 for rent x 3 (First/Last/Security) $2,000 for 20 desks & chairs from Ikea $150 for a wireless router $500 for a 1 year insurance policy $300 for misc things like trash cans & bags, cleaning supplies, etc

Our second (replacement for the original) 4500 square foot Indy Hall $18,000 for rent x 3 (First/Last/Security) $1,600 for additional workstation furniture $600 for first conference room table & chairs $300 for whiteboards $3,000 for networking equipment $2,000 for projector & installation equipment $5,000 for misc furniture, lockers, kitchen supplies, etc