Shared Workspace for $160/sq ft/year?! Hurts So Good.
Shared Workspace for $160/sq ft/year?! Hurts So Good.
Startups by the thousands have flocked to “co-working spaces” around the country to make their first home. To this office leasing veteran, “collaborative” space…”shared office space”…"executive suite space”…has been around since the beginning of time. The wave of national expansion and explosion of growth amongst space providers has become intensely competitive. As the building cranes fly, so has the co-location-space business to keep up with white-hot demand. In San Francisco, the old stalwarts like Regus, ServCorp and ReadiSuite have seen scores of recent births — and a few massive new players like WeWork. Just as startups put on the dawg to woo new employees, the suite operators have figured out how to endear themselves to the startup community. Free beer. C’mon. Cool digs. Dogs. Resources — not just the dry provision of office admin stuff, but access to VC/Angel funders, pitch-nights, financial advisory support, legal support, pet supplies and of course, adult toys. Trust that this dynamic is amazing for the providers — which is why you’re currently seeing ridiculous expansion from the provider community; and, wow, these environments are totally happening social and networking environments at apparently reasonable costs — with great flexibility for the startup community to grow and then go.
But try to ignore the cost per square foot, folks. And the “lease” document? It’s essentially an adhesion contract, like a contract for renting a car. You’re not exactly invited to make changes. Just think: My way or the highway. Following (changing the name to Space to Go, “S2G”, to protect the guilty parties) are real-life economics for a client presently considering entering into a shared-space contract:
ECONOMICS:
In order to equate S2G’s rent with “normal” rent for office space outside their Center, we should apply a interior circulation factor (40%) and a Building load factor (use 20%) to arrive at “rentable square feet” elsewhere. This is consistent with what we engineered into Griddig’s transaction platform tool, “Calculate ”.
So, a 96 square foot office at S2G = 96 times 1.40 = 134.4 “traditional usable square feet” times 1.20 load factor = approx. 161 “traditional rentable square feet”. S2G’s $2,150/month rent for 96 square feet corresponds to $25,800/year/161 rentable square feet, or $160.25/rsf/year. Not a bad mark-up for the S2G folks!
Think about our representing your interests in your next office leasing negotiation. Thanks.
Cheers,
MIHALOVICH PARTNERS
655 Montgomery Street, Suite 1490
San Francisco, CA 94111
T: 415-434-2820
C: 415-999-9244
T: @MihalovichCRE
E: dan@TheSpacePlace.net
W: www.TheSpacePlace.net
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