Experts within the office sector have recognized the value of coworking as the industry seeps into buildings across the world. Scott Unger, office specialist and SVP of commercial real estate firm Kidder Mathews, said that only time will tell if the coworking industry can be profitable, and office owners should be observant of losses from coworking tenants.
An American Realty Advisors report revealed that if an asset has a coworking tenant that takes up 20% or less of the building, investors see more value in the building. When the tenant occupies 20 to 40%, that’s when opinion becomes varied, but over 40% and the value is reduced.
With FASB’s new corporate accounting rules that requires companies to report office space obligations, coworking operators might be the more favorable option.
“A strength of the coworking industry and benefit to the ownership of the office asset is the potential for increased demand in the building as a coworking occupant requires additional space for its operations,” said Unger.
Still, short-term leases for coworking members could leave building owners hanging out to dry in the face of a recession as they would need to take on the coworking operator’s rent payments. Finding a balance will be key for building owners as the coworking industry makes it presence more prevalent across offices.