7

Trying to get a coworking space up and running in an area that has a few vacant buildings. The area is a great spot, but I don't think the coworking group could initially afford rent in this area.

What offer could we make to a commercial property landlord, to allow a coworking group to use a space for free until they rent it out?

Edit: I do believe every accommodation could be made if the owner needs to sell like closing for a few hours while he shows the building. We also could help with utilities since I know they must be paying something. These aren't abandoned buildings. They're in a downtown area that is slowing growing.

|improve this question
  • 1
    What will the coworking group do there? Is it just business or a group of hobbyists? Maybe, they are a charity organization. Please tell us who the group is and what they do. – Zerotime Sep 13 '15 at 15:15
  • Rather than just rent, have you considered other issues a landlord might face having occupiers in the building such as liability or utilities expenses. Consider that most landlords like a triple net lease where they literally have nothing to worry about. How do you make your proposal stress free for them? – Greg Chase Sep 18 '15 at 5:56
  • @GregChase - No, I have not considered liability, but have considered other thing. – JeffO Sep 21 '15 at 18:16
  • @Zerotime - membership may be varied because we haven't decided if it would include: hobbyists, work from home, independently employed, or creating a startup. – JeffO Sep 21 '15 at 18:35
7

If you have a business plan that leads to you having the money to pay rent after a while, your best bet is to negotiate HARD with your landlord-to-be, business to business. I know someone who negotiated no rent for 6 months, then half rent for 6 months, then 3/4 rent for a year, and normal after the 2 year mark. I got 1/4 for 6 months, 1/2 for 6 months, 3/4 for 6 months and normal after 18 months (different town, less vacant space.) This is a little-known fact of commercial real estate where I live that may apply where you do.

Don't talk about being a community or a charity or a good cause. Just say you have startup expenses, and it will take time for revenue to ramp up, so you can't afford full rent at the start.

If on the other hand you never think you will be able to pay rent, I would suggest approaching the space that looks least like an office, and offering to clean, paint, furnish and occupy it so it looks like an office, thus making it easier to rent. State explicitly that you would do the work and provide the materials in lieu of rent, and that you would vacate on say two weeks notice if the landlord successfully rents the place. Then repeat in another building. This will not only help whoever is using the space for coworking, but also raise the quality of the business space in your town and be a good deed.

|improve this answer
  • Why not mention we're a charity? – JeffO Sep 21 '15 at 18:14
  • 1
    Because then they will hear "we deserve a donation from you because we're a good cause" when a better message is "to be able to rent this to me you need to give me a discount" - The first point can be rebutted - I don't like that cause, or I like it but I don't donate thousands of dollars to charities, get a grant, etc. The two examples I gave you were both for-profit companies negotiating deals with commercial landlords, not any kind of donation or special break for being a good cause. – Kate Gregory Sep 21 '15 at 18:18
  • I agree that trying to get a significant discount is a better proposition than free. – JeffO Oct 9 '15 at 22:38
3

I think it depends on the type of building and the level of occupancy. If its a huge building with no occupants, just forget it now. If its a small building (less than, say, 8000 square feet, you might have a chance.

You will have to cover the heat, hot water, electricity, and maintenance.

If the building is already mostly occupied, again, I don't see much reason for a landlord to donate the space, mainly because that means occupancy rates are high and there's a good chance someone else will want it soon.

Another idea is to pitch the project to the landlord as a business opportunity for them. Run the numbers. How many tables will you be putting in? What is the going rate in your area for co-working? How about for Regus-type temp office solutions? How much would you have to pay for enterprise level internet, electricity for the number of computers you foresee, lights, coffee maker, tea kettle, fridge, etc? Will you be installing an alarm system? how much will your insurance cost? Will you be advertising? Get quotes or estimates on all these things. Make a budget for the opening, plus a monthly expenses budget, plus cash flow projections, marketing plan, etc. Get meetings with landlords and PITCH THEM your idea. One of them might bite and they'll end up as a (semi) committed partner with an investment in your success, not just another d-bag waiting for you to hand them a check a the beginning of every month.

|improve this answer
  • 1
    They're all pretty much single space, but some have apartments above. It's a downtown stretch about 8 blocks long with 10+ vacancies. – JeffO Oct 9 '15 at 22:36
3

I actually had a couple of friends who did exactly what you are describing. They came up with a business plan with the intention of turning it into a profitable venture, agreed to maintain the property as a tenant would, and pledged paying rent once they became profitable.

In their case, they had a specific plan for making money, which included memberships, event fees, sub-leasing offices, renting desks in shared offices, etc.

They also found a property that the owner was sitting on until the real estate market got better. The owner was hoping to sell to condo developers once the market improved. Since the property was just sitting there and the owner had no intention of improving it, having free tenants in there would be preferable to having it sit empty or having a tenant that required the owner to build-out or improve the property.

They also paid their own utilities, which were billed directly by the providers. That way there was no out-of-pocket expenses for the owner, since the tenants were responsible for their own electricity, water, internet, phones, etc.

The co-working space operated for many years successfully and attracted a loyal community until the leaders decided to go on to explore new opportunities. Once the co-working space moved out, the building was tore down, and the lot sold to a condo developer.

If I were to do the same thing, I would have added a little cafe, with coffee, snacks and a simple lunch menu, or perhaps outsource that to a food truck or another vendor. If done right, I think that would have attracted more people, and provided additional revenue.

The key is that they had a solid plan, and were able to convince the owner that it was in his best interest to accept their proposition.

Remember, you are competing with paying tenants, so make sure you have a compelling proposition.

|improve this answer

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.