Recently the coworking and "office as a service" trend has been taking most major markets by storm. I have been hearing that REITs are starting to re-position their assets to attract coworking operators and offering very attractive management agreements. My question is do you think this is going to be a lasting trend or a flash in pan. Also if landlords decide to start implementing "coworking" into their buildings themselves how do lenders look at that on the BS?
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I think it will be a lasting trend, but will most likely simmer down a notch. Many co-working spaces sprouting up, but at some point supply and demand will reach equilibrium.
Less stable cash flows means riskier cash flow profile. Especially if in a market downturn, we'll see exactly how low these co-working spaces can keep their vacancy rates. Historic profile of some level of recurring cash flow will help, but not as much as having 5% vacancy rates with long-term leases.
Aren't these "coworking office as a service" operators typically tenants themselves? For example, companies like Industrious, WeWork, etc. just lease a floor and manage their memberships themselves. What would REITs have to do that is different than trying to attract any other office tenant?
The REIT would basically build out the space ($90-$100/sf) and sign an operating agreement with someone like Industrious or WeWork. The landlord would then participate in the upside and the operator protects itself from the large upfront costs. At some point I figure the REITs will try and cut out the operators all together and build/manage flexible office space in their buildings themselves. As companies grow out of the coworking area in the buildings the REITs can convert them into traditional office users with little effort.
I am confused here. Is the REIT and Landlord the same person?
Idk man. Guess who went BK after the dot com blowup? Regus. Know what they do? Look them up
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