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Coworking And Traditional Tenants Are Treated Equally

According to a new report from MIT’s Real Estate Innovation Lab, called “The Financial Impacts Of Coworking: Rental Prices And Market Dynamics In The Commercial Office Market,” landlords see coworking tenants as substitutes for traditional office tenants.

“It looks like the landlord is doing this calculus and saying, ‘This works for us,’ especially if they have the same credit quality as the other tenants in the building,” said Andrea Chegut, MIT Real Estate Innovation Lab Director and co-author of the report.

The study looked at 222 coworking leases and 3,979 leases of tenants within the same building between 2008 and 2018 across major markets such as New York City, San Francisco, Los Angeles, Boston, Chicago and Seattle.

The report found that coworking operators generally paid $4 per square foot more in rent and had six-year longer leases, but incentives like free rent and higher tenant improvement allowances brought down the companies rent to match traditional tenants in the building.

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Upon analyzing the leases studied in the report, it has become evident that the coworking sector is not treated any differently than other tenants on pricing. 

“The lease terms are longer because the T.I. requirement is higher — not vice versa,” said Ariel Bentata, founding and Managing Partner of Investments at Accesso. “These guys have to create a lot of common areas, devise offices in small spaces and use a lot of glass that makes space much more expensive for T.I. than for a typical tenant. The only way to make these deals work is have them operate over a longer period of time.”

ABOUT Aayat Ali
Aayat Ali

Aayat is an editor for the Daily Digest based out of Kentucky. She has worked with local coworking spaces since August of 2017 and enjoys taking her firsthand knowledge to write about the fascinating, constantly evolving world of flexible workspaces. Feel free to reach out to her at [email protected] View all posts by Aayat Ali

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