Big Landlords Aren't Threatened By Co-Working Providers, They Welcome Them
Co-working and open plan space providers make a lot of noise as market disruptors, but many of the big names in real estate see these new players as tenants of traditional landlords, rather than competitors.
In a survey of the high-level commercial real estate execs at DLA Piper’s Global Real Estate Summit, 66% of respondents took this benign view of the new office space providers.
“They view them as incubators,” DLA’s Jay Epstien tells Bisnow. “These places, like WeWork, are accessing occupiers of office buildings that in fact the Boston Properties, Brookfields, Vornados and those kinds of folks couldn’t access.
Jay adds these big landlords aren’t leasing 2,500 SF spaces the way co-working providers do, let alone “people leasing essentially a seat at a bench.”
These real estate execs don’t feel like they’re losing tenants to the so-called market disruptors—especially when companies like WeWork are leasing large chunks of space in the landlords’ buildings.
David Mandell, CEO of the flexible space platform PivotDesk, tells Bisnow that co-working space is simply the first potential solution for the rigid nature of traditional leases, at a time when companies (i.e. tenants) are growing more unpredictable and dynamic.
“What landlords are really looking for is simply a more flexible solution for potential customers, and the only option they see right now are co-working spaces,” David says. “We’re actually dealing with a few landlords that are actually creating both their own co-working spaces (and I would call them ‘flexible’ spaces, rather than co-working spaces) as well as giving clients more flexibility to get them into their own space."
Jamestown Properties, for instance, just purchased a new building in Boston, and the first thing it did was put a whole floor on PivotDesk, providing its own flexible space as opposed to leasing to a co-working provider, according to David.
“We got 10 or 12 small companies in there immediately,” David says, “and several of those companies then evolved to take a real lease in the building.”
For now, though, co-working companies like WeWork are among the most visible providers of the flexible space that traditional landlords would like to take advantage of—and it probably helps when you hit a $16B valuation.