What is the real cost of using commercial real estate?
As
an owner of a Venture X shared office space for over sixteen months, I have
fielded many questions on the cost of “using” real
estate. Location, cost, and services are the three factors in
the decision-making process for most entrepreneurs and small
businesses. I am far from an expert in the commercial real estate
business, but I do have real-life experience in offering a great product and
service to my customers at Venture X in Denver. The focus of this
discussion is the cost of a private office and how it plays in the decision
process. Needless to say, the cost is directly impacted by the other
two factors of location and service.
I
find when talking with prospects about Venture X and our private offices the
discussion usually starts with how much per square foot. This
question signals to me that the prospective customer is having a hard time
differentiating between traditional office real estate and what we call shared
offices or coworking. My typical response is that we actually do not
sell memberships on the square foot. Venture X is an all-inclusive
experience with no hidden costs. We do offer value-added services on
top of your office membership but those are all optional. One price
will get you and your team 24 x7 access to a full turnkey office suite
experience. Many of my members call our experience at Venture X –
“coworking for adults.”
What
is included in this turnkey experience at Venture X and how does that differ
from the cost of a traditional lease? Below are just some of the
areas to consider:
Factors to Consider
|
Share Office
|
Lease
|
Do
you have $100,000 plus in credit?
|
Not
Needed
|
Required
|
Do
you have collateral up equal the value of lease?
|
Not
Needed
|
Required
|
How
do you spend your company money?
|
Operational
|
Capital
|
Do
you have $40-$60sq ft to build out the space?
|
Not
Needed
|
Required
|
Do
you have experience in building real estate?
|
Not
Needed
|
Hire
experts
|
Base
rent increases, CAM, taxes, insurance?
|
We
handle
|
You
handle
|
Cleaning,
maintenance, repairs, garbage?
|
We
handle
|
You
handle
|
Access,
physical security, supplies, consumables?
|
We
handle
|
You
handle
|
Network,
internet, security, printing, A/V?
|
We
handle
|
You
handle
|
Your
team time to do all the above?
|
None
|
Significant
|
Flexibility
to grow, shrink, and move?
|
Yes
|
None
|
The
above are all hard costs for your business. You are either tying up
your capital, using your capital to invest in items you will not get back
like construction, or spending capital on your people’s time to manage all the
above. I many times relate shared workspaces to cloud
computing. I will ask many people if they see the day of hiring a
bunch of IT professionals to run your applications will come back or is
cloud-delivered IT services here to stay? The answer to this question
is very easy. I truly believe this has a direct parallel to office
space and how it is consumed now and in the future.
The cost
of using real estate comes in many forms. Yes, dollars per square
foot is a valid question but only tells one of the cost factors of using real estate
someone else owns. Once you have answered the question of shared
space or traditional related to the cost the other two factors of location and
services become much easier. Is the location near your
employees or customer? Does it offer many transportation options? Is
it close to major intersections? What services are offered as an onsite
gym? Food hall? Security? Events? Front Desk? Mail?
The
movement of shared offices and coworking has strong support from the
experts in the commercial real estate industry like CBRE and Cushman Wakefield
which in many cases are consulting with their large clients to utilize shared
workspaces for up to 40% of their client’s employees. This being
said at Venture X Denver few of my clients have used a commercial broker to
help make a decision. It seems the decision was intuitive and easy
after looking at the facts of cost.
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