Apartment communities adapting the popular ‘co-work’ model are generating ancillary income while pleasing their residents.
Apartment communities located in key urban employment hubs are redefining the concept of work-life balance to the tune of hundreds of dollars of ancillary income each month.
Co-working is commercial real estate’s much ballyhooed non-traditional office concept that continues to gain momentum nationwide. It caters mostly to corporate employees who regularly work in remote locations, contractors who wish not to be tied to the responsibilities of managing a full office space and telecommuters who prefer that their “home office” is near where they live.
Apartment developers and owners have taken this a few steps further, literally and figuratively, by bringing this demographic under their roofs. Wood Partners, Optima, Inc., AMLI and most recently Camden are part of a growing list that have considered this concept and set forth to make it work within their apartment communities.
“We noticed there was steady rise in the number of residents who telecommute,” Dan Gladden, President, East-Region, AMLI, says. “We wanted to try out this approach at one of our properties. We knew there would be some risk involved. The first year, we only leased a couple spaces. Now, all are filled.”
Wood Partners has made a significant investment in this business model, offering workspaces in its communities and is incorporating them in half of the 26 communities that are under development, says Steve Hallsey, Managing Director, Wood Partners.
“For a couple of years now, we have been experimenting with this and seem to have found a formula that works,” Hallsey says. “It is now a huge focus for our company. It’s been a tremendous benefit for our company and our residents.”
Hallsey says demand has steadily increased to the point that his onsite staff is now rethinking the monthly rent charged for these spaces so that it can better leverage the potential revenue opportunity.
“At the start, we were getting about $50 per month and now it’s up to $250 or $300 per month,” Hallsey says. “The intensity and dynamics for this leasing have made it so that it’s always on our property managers’ minds.”
At AMLI, its Atlanta community in Buckhead, AMLI 3464, was built almost three years ago to include eight work spaces sized 8 x 8 feet or 10 x 10 feet. It charges $200 to $250 per month per unit.
In Florida, AMLI Joya in the Dadeland-Miami area has 12 slightly smaller workspaces that are leased for $100 to $200 per month. The workspace was designed by the community’s original owner, Wood Partners, who sold it to AMLI in the fall.
CoWork by Camden is on schedule to open in May in Charlotte, N.C., located beside its Camden Gallery property, where it converted existing space into offices.
“It was an old warehouse that our property was built around,” Julie Keel, Vice President of Marketing, Camden, says. “We could have torn it down or put it to use. We had toured other boutique co-working spaces and were looking into that business model. We concluded with the decision to try our hand at it.”
The co-work portion of the stand-alone property includes 21 private offices, 20 dedicated desks and 35 flex memberships that grant access to café-style seating in any of the common areas. It’s an open, collaborative floor plan design, but with private office spaces as well, Keel says. It has outdoor patio seating with Wi-Fi if members want to work outdoors. Hush booths and meetings or event spaces are part of the layout.
Month-to-month lease rates are $175 for flex membership; $325 for a dedicated desk; and $525 for a private office.
“When we built the property, it was a funky use,” Camden Chairman of the Board and CEO Ric Campo says. “We’re also looking to try this at even more developments, doing more co-working space, rather than doing [amenities spaces] like we’ve done in the past.”
Optima’s first attempt to include co-working suites was in 2007 at Optima Camelview Village in Scottsdale, Ariz. — a property with commercial and retail space as well.
“We built 12 office spaces, and to meet demand, we kept adding more and it now has 46,” Tara Hovey, President and COO, Optima, says. “To create suites as we went along, we used space that had been dedicated to street-level retail, but not street-facing retail. The entire project was built in phases, starting in 2007, so we could take our time as we tried out the concept. Because we’re in the position of being the owner, architect, contractor and developer, we’re more comfortable with taking risks. We had plenty of space and wanted to consider creative ways to use it.”
The Optima Camelview Village office suites are 100 percent leased and have a high retention rate — more than 75 percent, Hovey says. Its leasing agents mention the business suite availability to new residents because there is the potential for suite turnover. There is a waiting list.
“At Optima developments that currently offer co-working suites, spaces are 125 to 1,500 square feet. The spaces are ready – just plug-in and go. They come with chairs, desks and are basically fully furnished. Some have mini refrigerators. Guests sign six- to 12-month operating agreements. We refer to these as agreements because we want to give them the flexibility to expand their areas if they need to. If something better becomes available, they can upgrade. They don’t want to be obligated to one co-work space for a given length of time.”
The 32 suites at Optima Sonoran Village in Scottsdale are 94 percent occupied. Rent is $400 to $3,500 per month. Hovey says Optima’s Arizona office suites have seen consistent rent growth of 3 percent to 4 percent.
In Chicago, a luxury rental property that Optima designed, built and later sold, Optima Chicago Center, has 11 suites at 163 square feet to 1,300 square feet and is 100 percent occupied. Optima’s latest development to offer office suites is Optima Signature in Chicago — 21 suites at 194 square feet to 1,500 square feet.
Based on location, Optima’s office space perks include a shared kitchen and a conference room available to rent hourly or by the day. Prices are based on size, location and whether there is an amenity package. For example, at Optima Signature, they have access to seventh- and eighth-floor amenities, which includes an indoor and outdoor pool, basketball courts and a fitness center. These exceed amenities you would find at a corporate campus, such as Google.
Bozzuto is leasing space in its The Apollo community in Washington, D.C., to WeWork, which then rents that space to residents and non-residents, according to The Bozzuto Group’s Director of Corporate Communications and Marketing, Chintimini Keith.
The community includes 550 work spaces, according to WeWork Marketing Associate Rachel Gartlan. WeWork lists these spaces at $350, $450 and $670 per month and there is a waiting list.
Unplug the Fax Machines
Because amenity space in any apartment building is limited, Gladden says the biggest questions operators must ask are: “How much do you dedicate to a private WeWork-type office concept versus toward amenities that can be shared by all residents? And, how much do your residents value these types of office spaces compared to space used for the fitness center or the gourmet kitchen?” — or to the “old-fashioned” business center.
Setting up a computer, printer and — OMG, a fax machine — is passé. During industry conference panels about amenity choices, apartment operators will often joke how underutilized this type of office has become. Many say, if nothing else, that this space could be better served as a place to store the overflow delivery of resident packages.
Gladden says, “Many of our clubrooms or amenity spaces are now incorporating multiple sitting or workspaces, that consist of such things as huddle spaces, pods, booths and conference tables – like what might be found in a Starbucks or other coffee house. At only two of our communities do we currently have dedicated private offices.”
Hallsey says Wood Partners’ formula per site is to include approximately 900 square feet of leasable work space per property, which gives it between six and eight spaces (size of spaces varies). Connectivity is important for office spaces and how it is offered varies. Wood Partners has its guests use their own Internet provider.
“Having reliable Wi-Fi is critical,” Gladden says. “We don’t employ any specific support staff for these co-work areas, but we do keep them clean. You can price [the spaces] hourly or daily, but that can become a challenge to manage. Our pricing has been by trial and error to understand what the market will support.”
Camden Gallery completed construction in 2017 with 323 apartment homes. The CoWork by Camden building is a stand-alone operation and accepts non-residents. There is one full-time staff member onsite who serves as a hybrid property manager and concierge and is available from 9 a.m. to 6 p.m. CoWork by Camden is open 24/7 and available to all members 24/7.
Keel says CoWork by Camden is considering including a NoBrick space, which is a grab-and-go organic market and operates much like a self-serve snack bar found in hotels and airports.
Who Works/Lives There
Optima allows its office clients to personalize their office spaces by decorating them themselves.
“Residents want to work from home, but also want a workspace they can call their own,” Hovey says. “If they want to have business clients over, for example, they want to bring them to a place that feels professional.”
Hallsey says Wood Partners is attracting non-residents. A merchant builder, it sees a 90 percent occupancy rate portfolio-wide for its properties that are over 90 percent occupied. Its Piedmont Atlanta Mid-Tower has 12 business suites and three-fourths of them are leased by non-residents.
“These office spaces are used by those who work in nearby businesses where the office space might be overflowing with employees,” Hallsey says. “Those who live in the condos nearby have also signed up. Because there is no competition for this kind of product in areas where we offer office space, we have the run of the land when it comes to attracting business professionals who want this kind of arrangement.”
Wood Partners’ Framingham, Mass., apartment community is near the train station. It serves professionals who are commuting home and might want to work a bit later, closer to home, Hallsey says.
CoWork by Camden’s community is in the trendy South End neighborhood of Charlotte and is part of a walkable area that is only a block from a light rail station.
Hovey says one of her clients was a company that was closing their headquarters. “They decided that they didn’t want the long-term burden of managing their own office. But they needed space, so they leased five office suites.”
Let’s Be Neighbors
For apartment leasing professionals – whether they have office spaces in their community or their community is located near a branded co-work office such as WeWork or Spaces – there is an attractive selling proposition.
Apartment communities are reaching out to their nearby co-work office neighbors to pitch their rental housing lifestyle to professionals who are working there and who seek shorter commutes.
On the other hand, co-work office buildings are connecting with apartment communities nearby and are marketing that residents there who are seeking to shorten their commutes could sign up to work at their co-work offices.
Bozzuto’s Signature community in Reston, Va., which opened in January, is part of the mixed-use Reston Town Center campus. It is across the street from Refractions, a new firm that offers a full floor of workspaces near the tech corridor that leads to Dulles Airport, geared toward a collaborative, start-up company environment.
Signature’s leasing manager Tyler McCrary says, “There are high-level executives who live at our community, mostly just Monday through Friday. This is not the primary home. They live with us to ease their work travel, flying in and out of Dulles Airport each week. They certainly would be candidates for having a co-work facility either inside or close to their apartment.”
McCreary and Refractions have not connected yet. But the management staff of co-working office Spaces near the Wiehle-Reston Metro train station in Reston met with another Bozzuto property, Aperture, in late 2018, exchanging marketing materials so each could recommend the other to residents or clients, Spaces Community Manager, Diana Angelilli, says. Google recently leased the building’s top two floors.
Spaces holds networking socials for its clients, an ideal opportunity for the soft sell, she says. Angelilli, who worked several years as an apartment property manager, offered a 20 percent discount to Aperture residents who signed a minimum six-month lease.
Kelsey Blanco, Sales and Marketing Associate, Bozzuto, says. “When we market Aperture, we mention the convenience of working nearby at Spaces to avoid commuting and improving work-life balance, especially for residents who are business owners or who work from home. We will continue to foster this relationship, as it is one proving to be beneficial to our residents.”
In addition to its strong Instagram and Facebook marketing, Keel says CoWork by Camden is publicizing itself by offering a membership discount to any Camden resident living in the Charlotte metro area and offers a one-day pass to anyone who wants to try it for $25. This outreach is featured on Camden’s resident portal.
Gladden says AMLI markets its workspaces on a first-come-first-served, less-formal basis. The spaces are only available to its residents.
At a Location Near You
According to coworkingresources.com’s most recent data, 80 co-working office openings in the United States were announced in November. Texas led the way with 12 new spaces, four more than the prior month; California welcomed 10 new spaces, two more than October, and Washington and New York each opened four new spaces.
While co-working has become a global phenomenon, the U.S. led the pack in November with 41.2 percent of the openings. There were 31 in the United Kingdom during August, almost two times as many compared to the previous month.
Spaces, through parent company IWG, is now offering franchise agreements.
Co-working office companies now number close to two dozen. WeWork is the largest, with 341 locations in 65 cities around the world.
In March, it claimed 400,000 individual members, defined as professionals who pay a monthly membership rate, granting them access in any location worldwide. Membership rates start at $45.
Gladden says AMLI will continue to experiment with the concept and is looking for more opportunities. “Again, it comes back to managing and having creativity within the amenity space,” he says.
Camden is focusing on this one CoWork by Camden and will evaluate the success before adding this concept elsewhere, Keel says.
When Your Office is Less Than a Block From Your Apartment
Spaces and its other neighbor apartment community, Comstock’s BLVD, are located a few hundred feet from each other and the Metro train line in Reston. One of its apartment residents, Todd Spencer, 43, has always preferred working from home, but has found a nearby co-work office even more appealing.
“Renting near a co-work office fits into my lifestyle right now,” says Spencer, an accountant who lives with his girlfriend, a D.C.-bound commuter. “I’ve always worked near where I live. I’ve always considered driving to be a big waste of time. This situation enables me to get a lot more things done during the day.”
He moved into BLVD in October. He worked from home (his apartment) for a while but found it to be too distracting. He says it also “can be kind of depressing” working from home, essentially, potentially spending all day there.
“Technology today is good enough that I can do my job from just about anywhere,” Spencer says. “I’m disciplined. I have a routine. I wanted a workspace so that I could say, ‘This is the place where I work’ and then go there. I tried working from the common space business center in my apartment community, but I need dual monitors and other equipment. It’s not really set up for that environment. It was hard for me to hang out there and work because I’d be too tempted to go back to my apartment for this and that.’’
Spencer’s office – one of 108 spaces on Spaces’ two floors in the 16-story structure – has a door and shaded glass that has some natural sunlight while still providing privacy. There are three desks and chairs, a locking file cabinet and full and reliable Wi-Fi connection.
Those who lease at Spaces are given an address that they can put on their business cards. They can have mail delivered there if they choose.
“It could fit three people, but it’s an ideal amount of space for me and a temp worker who comes in three days a week to help me for a total of about 20 hours,” Spencer says.
He’s on a month-to-month lease for about $750 per month.
“The rent would have been cheaper if I had made more of a commitment,” Spencer says. “But when you consider that it’s about $200 to $300 to have business Wi-Fi set up in your apartment, for example, it’s still not a bad deal.”
WeWork Occupancy Drops to 80 Percent
WeWork Companies in late March reported that its loss last year doubled to nearly $2 billion as it spent heavily in an effort to rapidly expand its network of shared offices around the world, The Wall Street Journal (WSJ) reports.
WeWork executives said the losses are reflective of investments required to build out new offices, and that once locations are open and well-leased, they make far more money than the cost to operate, WSJ reports.
WeWork said its occupancy rate at the end of last year fell to about 80 percent from 84 percent in Q3, WSJ reports, and that the average revenue each member creates per year—continued a gradual fall to $6,360 and is now down 13.5 percent since January 2016.