Major office space provider IWG has started adopting the franchisor model, pioneered by fast-food company McDonald’s, in its effort to edge further away from WeWork.
REITs allow coworking providers to balance out potential risks and rewards
Coworking has been embraced by many real estate investment trusts (REITs) across the nation. Shared office models have established a permanent shift among how employees work, which has created a pathway for U.S. office REITs.
Still, the rapid growth carries rent risks that need to be managed. Many operators avoid such risks by associating with less established tenants, but this model can hold also brings asset/liability that favors customer commitments. This leaves REITs unable to offset the high capital of certain office assets.
Now, many U.S. equity REITs and other real estate companies have gone public with both the benefits and risk that come with contracting a space out to coworking tenants.
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“Long-term leases are a key positive office sector attribute that help balance high capex and leasing costs,” said Stephen Boyd, the Senior Director in Fitch Ratings’ Corporates group.
A REIT landlord that leases spaces to coworking provider under a traditional model is more credit friendly, but a fee-based model where the landlord has a better chance for greater cash flow risk is not as much.
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Flexible workspace provider Knotel has once again expanded its presence in central London, signing three new deals across the city totaling 40,000 square feet.
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Although coworking spaces are often categorized as servicing major cities, tier II cities are having their moment as many startups continue to flood into these areas.
Amy Nelson, CEO of The Riveter, has made it her business to promote inclusivity of women in professional settings while also providing men tools to value gender equality.
A survey of 1,000 WeWork members found that, while some use the space out of convenience, others find the culture to have an effect on their professional identities.
While WeWork is expected to file for an IPO this year, its valuation and recently announced losses have left investors worried about the sustainability of the company.
IWG has started rolling out a franchise model, similar to that of McDonald’s, enlisting franchisees to take the reins in subleasing Regus and Spaces offices to companies.
Chicago-based Novel Coworking has purchased Denver’s 195,753 square foot, 17-story boutique office property Trinity Place in Uptown that is currently 65% leased.