Hines, Equity Office Look To Crack The Co-Working Code

WeWork's offices at 20 West Kinzie, Chicago
Courtesy of Silva Brand
The Interior Of A Wework Office

Two of the largest U.S. office owners are recognizing the popularity of co-working spaces and looking to provide these flexible workspaces on their own. But they first must gain an understanding of the business model.

Equity Office and Hines have both issued requests for proposals in pursuit of business partners to gain knowledge of co-working spaces like WeWork, Reuters reports. The move comes in response to the growth of co-working firms, which are increasingly signing large corporate clients that traditional landlords would normally expect to sign for permanent workspace.

Green Street estimates co-working is 50% more profitable than traditional office leases, but only when operated by a seasoned provider. The analysis firm advised against office landlords building the model themselves.

“Significant scale, know-how and brand awareness would be required to operate profitably, and providers like WeWork are already miles ahead on all of the above,” Green Street wrote in a report.

When Amazon expanded its Greater Boston presence, it did so by opening in a WeWork in the city’s Back Bay neighborhood, making the co-working company both a tenant and a competitor to its landlord. Amazon did the same in 2 Herald Square in Manhattan, taking a full 122K SF WeWork space in a 354K SF building owned by Sitt Asset Management.

Manhattan has become a pinnacle market for co-working due to its building boom, young workforce and job surge. WeWork bought Lord & Taylor's 103-year-old flagship building on Fifth Avenue for $850M in October. The 650K SF building will be the company’s headquarters after extensive renovations.

The deal also included an agreement for the company to open locations at Lord & Taylor parent company Hudson Bay Cos.’ stores in Toronto and Vancouver, Canada, and Frankfurt, Germany.

Traditional landlords who have been focused more on asset value than tenant needs are now looking to change that to court a younger workforce that will eventually make office space decisions. RXR Realty is partnering with Convene, an on-demand provider of meeting space, on space at its 26-story office building at 530 Fifth Ave. in Manhattan.

Equity Office’s RFP was largely inspired by the company looking to find a way to make its 1.3M SF Howard Hughes office complex in Los Angeles more attractive to tenants, according to Blackstone Group (Equity Office’s parent company) Head of U.S. Asset Management Rob Harper. He told Reuters he expects responses to the RFP within days.

Continue reading this story with a free account

Log in or register
Related Topics: Co-working , Equity Office , Hines , WeWork
Sign up for more articles like this
Subscribe to Bisnow's National Newsletters
Related Stories

Future White Sox Owner Advances Push To Build New Riverside Stadium

'We Aren't Competitive': Power, Taxes Keep Colorado On The Data Center Sidelines

MBK Sells Anaheim Apartments To TA Realty For $147M

Landmark Properties Opens Student Housing Project: The Los Angeles Deal Sheet

Why DivcoWest Is Advancing A New 19-Story Lab Development In Somerville

Angels Sale To Stan Kroenke Reopens Land Deal Possibilities With City Of Anaheim

Pennsylvania Avenue Office Sells For Repositioning: The D.C. Deal Sheet

Blue Owl Reportedly Planning Data Center REIT

Center City Office Demand Starts Spilling From Trophy To Class-A Despite Debt Issues

HUD Wants To Make It Easier To Bring Private Capital Into Public Housing

3,500-Home Margaritaville Active Adult Community Coming To Texas City: The Houston Deal Sheet

Private REIT Closes $650M Refinancing Of 549-Property Daycare Portfolio