Companies Sharing Space, Sharing Costs

Ace Hotel actively markets the lobby of its New York flagship as a coworking space. 

Marriott began marketing over 2,000 of the hotels in its global system as an alternative place to work. Rooms are offered for rent as offices during the day at affordable rates. The rooms were cleaned to meet CDC standards for COVID-19 and included in-room refreshments, high-speed internet, and phone for domestic calls. This can be particularly beneficial for people who live in small city apartments and whose home situation is not conducive for work. 

Capital One Bank built cafés into their banking lobbies where employees could set up shop and interact with customers who could also use the space for work. 

Zappos sponsored co-working lounges inside the Venetian hotel in Las Vegas.

The Times Center (New York Times building), which is used internally by New York Times employees, can be rented out for outside events at any time, day or night.

Bell Works (Bell Labs in New Jersey) intentionally designed all common areas for collaboration, informal meetings, and open workspaces, for both building tenants and the public. One client relocated their back-office operations here to reduce overall collaborative space by 20% within their contracted terms by leveraging the building’s common areas for informal meetings. They also paid lower rent here than in Manhattan or Hoboken.

It’s Called Corpoworking

The Covid-19 pandemic has shifted focus to another evolution in commercial real estate that these disparate companies all illustrate:  a growing trend among owners and occupiers of commercial real estate is to shift or share the cost burden of their space to outside users and third parties. This trend follows from the rise in coworking and because it’s being driven largely by corporations, the term that is starting to surface on several online forums is “corpoworking.” These spaces are transacted by increasing the activation of a corporate user’s traditional office and collaboration spaces outside the normal business hours by users outside of their organization and by the public more generally. 

There are quantitative and qualitative reasons why “corpoworking” is being considered by commercial real estate owners and occupiers.

• Revenue generation – Where the organization is both an owner and occupier of the space, they are looking for ways to generate incremental rental income by leveraging these spaces during non-business hours. Uses include pop-up events (galleries, performance, retail) and private parties in conference areas, lobbies, or outdoor areas. 
• Community goodwill – Where these spaces are made generally free to the public, it’s expected it improves their brand image and relationship with the community (and among their tenants or employees). While this driver is not necessarily about cost sharing, it could potentially lead to positive monetary impacts such as improved tenant retention. 
• Reduced space needs – Where organizations require space for informal meetings and casual conversations, these “community” collaborative spaces allow tenants to take less space within their contracted footprint and enjoy flexible arrangements for their teams. 
  • In some cases, office building lobbies are being converted into Wi-Fi-enabled co-working spaces, enabling tenants to take a smaller office footprint upstairs. 
  • Another facet of this collaborative arrangement is one in which the owner hosts innovators to jointly generate new services, products, or technologies and later shares in the revenue stream or royalties as part of the shared-space agreement.
  • Short-duration special project teams (2-10 days) may also be able to leverage these spaces as an alternative to renting a hotel conference room or coworking space.

Should this current trend continue in the CRE landscape, it could become table stakes for landlords, who will need to offer these spaces as standard amenities to attract and retain strong corporate tenants. Just as younger generations in the workforce are driving the change from enclosed offices and cubicle farms to more open plan workplaces, so too are they driving the trend to have multiple workplace options available to them including the use of “corpoworking” environments. While these spaces aren’t yet at a stage of maturity or prevalence to disrupt strategic space planning for most organizations, the ability to reactivate space to generate both quantifiable and qualifiable benefits (albeit modest) may become too attractive to pass up, particularly at a time of decreasing need for commercial space in a post-pandemic environment.

Rob Raymond is a managing director in the Real Estate Solutions Group at FTI Consulting where he focuses on corporate real estate strategy. Contact him at Rob.Raymond@FTIConsulting.com. The views expressed herein are those of the author and not necessarily the views of FTI Consulting.