Co-working company Industrious leases space in a Union Square office building for $67 per square foot, then charges end users $320 per square foot, the company's chief executive said at a panel discussion today. That's a 378% markup that the landlord never sees. Jamie Hodari, a founder of Industrious, said owners could share more of these types of spoils by entering into a joint venture or profit-sharing agreement with companies that provide co-working space or, like another city startup, Convene, provide amenity and meeting space. However, doing so would require nixing the traditional long-term lease. "It's the wrong relationship for both sides," Hodari said at a panel discussion hosted by leasing management company VTS. "It's wrong for tenants, and it's wrong for landlords." Building owners in particular, Hodari said, are getting a raw deal. To some extent they are on the hook if the space fails. For example, if they ink a large deal with WeWork that consistently loses money, the co-working firm would likely ask for some concession, including renegotiating part of the lease. But if that same space is wildly successful, owners still get only the agreed-upon rent. In the Union Square example, that means taking home $67 per square foot instead of sharing $320. "Ultimately the landlord is sharing in the downside risk," Hodari said. "Why in God's name would they not take the upside in the good years?"
Commercial landlords could profit from entering into joint ventures or profit-sharing agreements with co-workspace providers, Industrious founder Jamie Hodari has said. Owners of buildings get a poor deal since they are on the hook if a co-workspace operator fails, Hodari told a panel discussion hosted by leasing management company VTS. In such an event, owners will likely be asked to renegotiate part of the lease. This suggests they should negotiate deals that also enabled them to benefit when tenants are successful.