The co-working space business has rapidly become more crowded in recent years, but no less lucrative, which is perhaps why CBRE Group, the world’s largest commercial real estate services firm, has stepped into the industry, reports The Wall Street Journal. The company is looking to help landlords create their own flex-space companies rather than rely on intermediaries like WeWork.
Flex spaces have become appealing to large companies because they can expand and contract their space quickly and do so at any time. More companies are moving towards this model and away from the standard 10 to 15-year leases that have existed in the office space industry for decades.
At first, landlords embraced co-working companies like WeWork as a way to rent space and attract startup businesses. Now, property owners have expressed concerns that major tenants will remain loyal to the companies they see as “middlemen.” Such loyalty could diminish the owner’s ability over who’s moving in and out of their building.
CBRE looks to take a different approach as it enters the co-working company space. It still plans to capitalize on offering big landlords the same services that companies like WeWork, Industrious and Knotel do, but CBRE wants to establish partnerships with landlords so they can still have a relationship with tenants.
Hana, CBRE’s new business, will have a workspace on three floors of the PwC Tower in Dallas in a venture with Metropolitan Life Insurance, Co., according to The Wall Street Journal. MetLife owns the tower in a 900,000 square foot complex and the facility is scheduled to open in the middle of this year. Under Hana’s partnership agreements, CBRE and landlords will share design and building expenses along with the profits from operating the space. The partners will also take part in negotiations with occupants.
“(Traditional deals between co-working space companies and landlords) have completely misaligned incentives,” Hana Chief Executive Andrew Kupiec told The Wall Street Journal. Kupiec also said he hopes there will be multiple Hana facilities in 25 markets within a “three to four-year period” as well as partnerships with landlords.
CBRE is not alone when it comes to partnering with landlords, however. WeWork itself has used landlord partnerships more often to help quell their fears of becoming detached from their tenants. WeWork’s Chief Real Estate Development Officer stated the company has been using that structure more during the last three to four months.
Meanwhile other commercial real estate companies are moving into the flex space industry, including JLL, which had made numerous workplace investments, including one in an app firm called HqO. JLL stated tenants leased more than 23.2 million square feet of space in co-working spaces in the United States alone.