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Tenant Credit: Evaluating Co-working Companies

In 2016 and 2017, we have seen co-working spaces change the commercial real estate landscape. Understanding these tenants has become essential. The emergence of WeWork in recent years has given rise to a number of regional and national competitors, and these companies are reshaping a portion of the office leasing market in major commercial centers.

Coworking firms often seek substantial tenant improvement allowances and long lease terms. As an owner, there are several essential questions you should be asking about the firm's business model and operating metrics:

Business Model

  • How is the company structured? What entity signs its leases, and how does it guarantee or secure its leases?

  • How does the company differentiate itself from local or regional competitors? What competitors are already in the market, and is there room for another entrant / location? What types of companies / members does the company attract?

  • How quickly is the company expanding? Is it opening across multiple cities, concentrated locally, regionally, or in select core markets?

  • Does the company engage with the community effectively, or is it strictly for the benefit of its members?

  • How does the company finance operations? If it is backed by venture capital, who are they and how many rounds of investment has the company completed?

Operating Metrics

  • For existing locations, what is the average breakeven occupancy rate? How long does it take each location to reach breakeven occupancy?

  • How many members can work in the proposed space? How are membership contracts structured? What is the average revenue per member and average revenue per square foot?

  • How much revenue is generated from the location compared to it monthly cash rent? What are unit operating margins compared to consolidated operating margins?


These questions initiate TRA's approach to evaluating the unique nature of coworking companies. We continually refine our methodology to identify other potential risks they may pose to ownership and other investors. Please e-mail us at, call us at 312.368.1000, or visit our website at if you have questions about coworking firms or any other tenants.

#CoWorking #Coworking #RiskManagement #DueDiligence

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