WeWork v. Traditional Space
It’s an exciting moment. Your business is taking off. Sitting in your home office, or maybe someone else’s conference room, the thought enters your mind: “it’s time for my own space!” Offering flexibility and both private and shared solutions, WeWork is a favorite among many startups as well as corporations needing innovative solutions. As a real estate broker, I understand WeWork provides many advantages, and here at Estate Match Realty, we have often partnered with the company to offer our clients quick solutions. However, if you've ever wondered what the differences between WeWork and a traditional office lease are, then look no further: you've come to the right location. Ok, a little pun intended.
Membership (Not a Lease) Agreement
In a traditional lease, there is a landlord (also called lessor) and tenant (also called lessee) whereas the tenant leases from the landlord space. The tenant has the right to use that space for its business purposes. The term of the lease varies between 1 to 10 years with most leases running 3 to 5 years depending upon the business model and other terms. WeWork offers a membership-service agreement, very much like a gym membership. Think of the last time you went to a gym. Your membership could be for a specific location, multiple locations, individual, or family. The membership at WeWork works the same. It is right to use anything from a desk to a private office based on different rates, for yourself or your team.
Collaborate Environment Approach
For many entrepreneurs, having shared space with other like-minded individuals is appealing. I mean, starting a business can often seem like a lonely venture (and we've been there too). Having people around you in different industries and backgrounds may have its advantages. WeWork invites this type of collaborate approach by offering already built-out common areas with a stocked kitchen, as well as networking and social events. Some locations even have craft beer and specialty coffee on tap. When leasing your own space, while some office buildings offer community events, it isn't the central focus. If you enjoy independence and controlling your environment, then traditional space may be a better fit.
Many small businesses are attracted to the idea of not having to spend capital on basic office functions like a receptionist, mail handling, IT, and furniture: you can plug and work immediately. These are separate in a traditional lease whereas most of these items are handled by the business itself. But don’t let the idea fool you. The cost of these services is baked into the membership fee already or added as additional items to your account. However, if you’d rather have someone else do the work without hiring additional staff or dealing with issues, then maybe it is worth the convenience cost.
Since WeWork is treated as a membership arrangement, your business is not paying "rent”; instead, the monthly amount is treated as a fee. When leasing office space, a business pays rent based on the square footage being occupied plus costs for utilities, internet, and sometimes building operating expenses based on one’s percentage share. WeWork has already contracted a lease with the landlord of the property directly based on the traditional method. Therefore, for WeWork to make money, they must charge its members more. Already included in the quoted price WeWork has factored their overhead cost, which includes all their costs to operate the space, plus profit.
So why should anyone choose WeWork over a traditional lease?
WeWork offers flexibility and service. It is a great option for entrepreneurs who are getting their business off the ground but are not sure of their long-term needs, including length or even location. It is also a good alternative option for sole proprietors who need small space that is harder to come by with all the amenity offerings being handled.
Why use Estate Match Realty for a WeWork space?
WeWork cooperates with brokers, and it's nice to know there are other options for our clients. They not only pay us a fee – there is no cost to you – they also send us exclusive inside information about new spaces, needs, and discounts not yet available to the public.
How do I know if I can get a better deal?
That's where we come in. Having negotiated hundreds of leases, we can sit down with you to discuss your goals and what options may be better aligned for your business. We also have connections with other coworking options like Regus/Spaces and Barrister, so whether it is a traditional lease or coworking space like WeWork, we can provide a complete analysis and provide advice without bias.