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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