Landlords struggling with office vacancy are open to ideas when it comes to filling up space, including co-share space.
Many are turning to the co-share work environment concept in order to offer flexible solutions for office users.
But it’s important to understand that co-habitable spaces are a different kind of real estate.
What a concept
From a tenant perspective a co-share rental is the best of all worlds.
They reduce overhead while having access to all common amenities and facilities.
And don’t think I’m knocking it, some of Saskatoon’s co-share rentals are amazing.
The Wall Street Common is a great example of doing it up right.
They took their two-storey office building to the next level in turns of fit up and ambience. It needs to be seen to be believed.
Keep in mind
Traditional real estate return is applied against the income and expense of every square inch of an investment property.
A co-share work space isn’t much different in that the landlord will need to understand their net income when all is said and done.
In commercial leasing we often break down pricing in per square foot lease rates and occupancy costs.
Part of this exercise is to be able to compare the net rent a landlord is expecting in addition to true building costs.
In a co-share scenario, however, it’s not that cut and dry.
Put a price on it
There needs to be a value or premium added to the amenities that come with the property.
Applying this as against square footage is not comparable because it will appear heavily inflated in comparison to traditional office space.
Typically, you’d see co-share space listed as a gross monthly value. This includes costs of all utilities, cleaning and maintenance.
Managing costs need to be evaluated carefully, as with more tenants comes more possible interaction required.
Operators also need to factor in likely a higher vacancy than traditional office as co-share users tend not to sign onto multi-year terms.
Long term plan
I’m always challenging landlords to think about their long term goals for their investment properties.
Will this add value to my property or de-value it or time?
Does this leasing align with my short or long term holding position on the property?
If there is any refinancing on the property required, will the tenancies in place be sufficient for my banking institution?
I’m sure I’m actually oversimplifying it to be honest. I imagine there could be a few things I’ve missed.
And one large factor that we haven’t touched on yet: supply and demand.
Does your market have enough of this product already? What does existing vacancy in nearby co-share look like?
There needs to really be a business model in hand to see if the rents being asked truly support the costs of running the property while realizing profit.
Much like any kind of real estate, success will be measured from dollars and cents.
If the outcome doesn’t support the effort to run such a model, perhaps it’s not as feasible as first assumed.
Guest Author: Kelly Macsymic
|Kelly Macsymic B.Ed
Sales Associate, ICR Commercial Real Estate
Business Manager, Stuart Commercial Inc.
275 First Avenue North
Saskatoon, SK S7K 1X2
P 1.306.664.6116 x125 C 1.306.280.4239
Vcard | [email protected]
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