Co-Working Spaces | Journal | FTI Consulting

Co-Working Spaces: Big Solution for Small Businesses

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Co-working offices are the stuff of sitcoms. Picture freshly-scrubbed millennials hunched over laptops in a renovated “creative” space chasing the dream of the next big app. Sounds like a Netflix original, doesn’t it?

Beyond the cliché, co-working offices — defined as open-floor plans with groups of workers (small businesses and freelancers) — are proving to be a hit in the real estate world. In 2016, the number of locations grew by 30 percent worldwide.

For small businesses (10 or fewer employees), co-working spaces make a lot of sense. They typically offer amenities associated with “big offices” but without the capital expense and long-term financial commitment. Leases are typically month-to-month with a “pay-per-seat” deal that allows for scaling up or down as needed depending on how the winds of fortune blow.

For landlords with older buildings in major urban markets, they can be a godsend. Historically, these stakeholders have been challenged to compete for larger tenants against landlords with more modern buildings. Meanwhile, small space users suffer from dwindling inventory and a lack of attention from real estate brokers seeking larger commissions.

Co-working companies fill the gap with their requirement for large open spaces to meet the needs of their many small space customers.

Co-working is a win-win: Not only does it give the small guys more flexibility and nicer space, but landlords of Class B office buildings with open floor plans can effectively partner with Co-working space providers to repurpose their obsolete office properties to fit the lean millennial workforce and growing small business/freelance sector. Class B offices were built at a time when 275 square feet per person or more was the norm. Packing these spaces at the rate of 85 square feet per person creates value for everyone.

As this infographic shows, co-working offices have become a sustainable business model.

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© Copyright 2017. The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
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