July 26, 2019
Although office giants are already contributing significantly, many investors are still unsure of the impact that coworking can have on their properties. The concept of flexible space has the potential to increase and diversify a building's revenue stream because tenants improve effective occupancy. However, flexible tenants do not always have strong commitments, so those buildings with a high percentage of flexible spaces are more at risk than those where flexible space is only a small portion.

Building typology

There is a divergence in rate yield when transactions are divided by class or type of building. With coworking spaces, Class B and C buildings increase their value more than Class A buildings. And the fact that improvements made by coworking operators help to convert lower-class buildings into Class A assets.

Flexible spaces locations

The allocated percentage also affects the value of a property. Class A buildings with a smaller proportion of coworking spaces tend to have a better return on investment than Class B assets. However, Class B assets with high coworking quotas have the potential to improve their substantial values.

Why does it happen? According to the study, the value implications of the many square meter property attributed to coworking could "scare" investors as they could associate them with greater risk.

However, for these actions to succeed, you need to know the market, understand the relationship with your current tenant and your desired tenant needs, collaborate with quality flexible companies that are aligned with asset positioning, and explore the possibility of cooperating with third parties, after all, the search for a cooperation agreement will provide the owner with a small capital injection, canceling out part of the risk linked to the sector.

Article developed from the study "The Property Value Proposition of Flexible Space" by CBRE USA.