In recent years, landlords and third-party providers have employed various forms of flexible leasing or co-working to fill spaces and answer tenant demand. This can boost leasing by appealing to the many organizations that have come to embrace the flexibility of short-term occupancy commitments.
That flexibility poses an inherent challenge for many co-working providers and landlords because end users aren’t contractually tied to a space beyond a contract term that may be as brief as one month. Without a common purpose or sense of community, co-working tenants may not feel allegiance to one co-working provider or location over another. There is an ongoing risk those occupiers will be lured away by a competitor’s more attractive or lower-priced offerings.
In this economic growth cycle, providers have typically addressed user-retention risk with amenity packages designed to keep occupiers coming back for more. As the economy slows, however, some investors worry that organizations and individuals may let their co-working memberships expire if their financial situations change. To compound the issue, WeWork’s highly publicized financial woes have created additional concern for landlords and tenants alike.
What would ease those misgivings would be an additional, enduring incentive for occupier allegiance. Preferably, that inducement would provide a unique connection to the subject property and instill in its subtenants a sense of belonging, a sense of being at home in their shared workplace.
A purpose-built office ecosystem offers occupiers the benefits of shared space as well as key advantages over conventional co-working models. Like a business incubator, ecosystems foster innovation by bringing together like-minded people and organizations with common goals and missions. As relationships develop between the organizations, the convenience and efficiency of working in proximity increases the motivation to remain at the property long term.
At Transwestern, we see brokerages like us as vital to creating a proper ecosystem. We have helped create ecosystems where we have seen collaboration increase and, in some cases, mergers between organizations within these vertical villages. Ecosystem tenants often find that shared services such as reception, event hosting and even fundraising are more compelling when aligned with a shared purpose. A service provider to a community of nonprofit agencies, for example, can include educational sessions on grant writing and volunteer coordination in its programming.
Locations populated exclusively by news organizations would have their own industry-specific preferences for shared infrastructure and programming. Journalists may appreciate a video editing lab and recording studios or private rooms to conduct interviews—amenities they are unlikely to find at a mainstream co-working facility but a potential draw for a news-oriented ecosystem.
In our mind, office ecosystems mitigate risk for building owners and co-working operators. Occupiers are highly motivated to retain their seat at the collective table, more so in a downturn than ever. Since these spaces occupy such a small part of most office building’s total square footage, operators are not overexposed in a single industry like they would be if they adopted a campus-style focus with their suites.