Home Personal Finance Can co-working companies in workplace properties get through economic losses?

Can co-working companies in workplace properties get through economic losses?

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One of the main tenants of workplace properties in Manhattan is a realty company which offers one workspace for the tenant.

The principal occupant in Manhattan, since last September, is WeWork Cos. which leave JP Morgan Chase and Co in its spot. WeWork Cos. leases 5.3 million square feet of space rentals in Manhattan. Moreover, in London, it is also one of the largest tenants since its establishment last 2014.

Companies working together often lease space for extension purposes. Co-working companies are now emerging in the business industry. The area they rented can later be opened temporarily for rental purposes too.

A co-working company works in ways such that the extent of leasing and the total measurement of the workspace are both determined. More importantly, companies can lease a cubicle in a short-term given that the rates of rental are increasing according to time.

Rental fees of co-working companies can come at a high price because of the rate increments. To reduce the cost of renting an expensive space, they offer their workspaces for subleasing.

The workspace that the companies offer often have internet, salons, and other services such as machines for coffee and beer. The emergence of co-working companies follows the growth of the most recent recession. Co-working industries are rapidly growing in the United States. In 2010, its space only occupied 12 million square feet. This year, the area already reached 59 million square feet.

Services offered by co-working businesses are compared to Airbnb’s. However, their way of working is different. Airbnb assists tenants to rent individual available spaces for a short time. While co-working spaces encourage many entrepreneurs to collaborate.

In entering the co-working business industry, the main tenants should rent the space for a long time; as for the areas for sub-rentals, tenants can sign a contract that will allow them for a short period. From the perspective of professionals in the field of realty, long time leasing can be a liability to the companies since they only offer workspaces for short-term uses. It might not be an effective way of earning profits.

WeWork’s assessment of $20B is doubted because of long-time responsibilities for short-time proceeds. Elaine Moore and Eric Platt speculated the amount of the company; in an article in Financial Times, they are questioning if the value of the company is worthy of its high price.

One of the principal administrators of co-working industries, known as IWG, in Toronto and Vancouver has a valuation of less than $4B.

Co-working companies as observed by experts

Looking at the situation economically, this can be a form of a downturn. If for example, the call for renting workspaces can deteriorate in no time, how can the co-working companies sustain their long-term rental fees? That is one of the floating questions in the industry nowadays.

The growth of the businesses is apparent in London’s perspective even if Brexit is making it difficult for firms in the said place. According to Cushman and Wakefield, co-working companies can occupy approximately 10% of office workspaces in the following years. Some investors can prove that co-working businesses are not vulnerable to losses.

Additionally, in Canada, co-working spaces are becoming a hit in marketplaces in Toronto, Montreal, and Vancouver. In the coming years, more spaces will be accessible once stockholders had a contract with the co-working companies.

How can the companies ensure that the requests for workspaces will still be increasing in the following years? If this question is answered, then these companies can continue relentlessly without going through severe economic losses.