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Shared Office Space Vs. Office Lease: What’s Right for Your Business?

Renting coworking space is an attractive and cost-effective option for startups, small businesses and even enterprise-level corporations.

As the demand for flexible workspaces rises, more coworking offices have cropped up in the Orange County area.

But as with any business lifecycle, there comes a time where you might outgrow a coworking setup or seek your own dedicated space.

So how do you know when is the right time to move on?

Through this guide, you’ll understand the advantages and challenges of coworking spaces and critical considerations to make before determining the next move for your business.

Who Uses Coworking Spaces?

Coworking leases are typically short-term (often month-to-month), allowing your business the freedom to come and go as you please.

As a tech hub, Irvine and Orange County are attracting more technology startups looking to scale their dreams into full-blown business operations.

Coworking spaces offer flexible options for companies of all sizes — from individuals to teams of more than 500.

Coworking spaces like WeWork and Techspace are great office solutions for small businesses or emerging startups in the area.

These coworking companies also offer enterprise office leases for large organizations looking to expand into additional locations beyond their headquarters.

The Challenges of Shared Office Space

While coworking spaces give businesses flexibility with their business plan, not having a dedicated space poses a few challenges:

  • Distractions: Coworking spaces charge by the room and office, making the open concept layout a more cost-effective solution. But working alongside other companies and team members can lead to excess noise and distractions that hinder productivity.
  • Exorbitant dues: Coworking spaces need to accommodate businesses of all sizes. To attract innovative companies, many coworking companies require leasees to pay hundreds of dollars in monthly dues. While some organizations might desire luxe amenities, others may be looking for a more modest office solution.
  • Limited office hours: Many coworking spaces place restrictions on when employees can access the office. If these timeframes don’t coincide with your typical work hours, you may be forced to find another solution.
  • Competition for shared spaces. If you’re in a crowded coworking building or popular city, securing a meeting room may require advanced reservations, which can conflict with your daily schedule.

What to Consider Before Leaving a Coworking Space

If you’re debating whether to leave or stay your coworking space, ask these questions first:

1. How Long Do You Have Left on Your Lease?

Agreements for coworking spaces are flexible compared to a traditional direct lease. However, getting out of the lease agreement isn’t so easy. You may need to give 30 to 90 days’ notice to your community manager to get out of your space with no penalties.

A lot can change in 30 to 90 days, especially for a startup. You may be in a situation where you sign a lease and are still on the hook for your coworking fees. Alternatively, 90 days might not be enough time for you to find a new location.

Be sure to have a solid plan in place before committing to leaving a coworking space. A tenant representation broker can help you organize and manage this project for you.

2. Are You Prepared to Commit to a Longer-Term Lease?

When looking to a traditional office lease, know that most landlords aren’t as willing to entertain month-to-month lease agreements, or even annual leases for tenants.

Competition for clean, creative office space is growing, and landlords know this. They often don’t mind letting their offices sit vacant because — if they hang on a little longer — they can secure a longer-term tenant.

In the Orange County commercial real estate market, landlords often require a minimum 3-year lease.

Landlords at larger buildings will allow you to start a new lease and grow within their portfolio if your space needs increase during your term. The same is not always true for down-sizing.

Before severing your coworking agreement, make sure you’re ready for the commitment.

3. Do You Have Definite Growth Plans?

It’s easy to add employees and desks to a coworking environment. But manipulating a traditional office space poses greater challenges. As mentioned, some landlords will accommodate your additional needs for space — this only solves part of your problem.

A coworking space already has the furniture, fixtures, and equipment (FF&E) needed for your new employees to hit the ground running. Do you know how much office space you'll need in the future?

If you have a solid growth plan, you can grow into a larger space. If there’s a chance your company could be acquired or funded soon, a coworking space might be the most flexible option for you.

4. Are the Amenities Worth It?

At WindWater Real Estate, we often hear from tenants at coworking facilities that the amenities aren’t worth the extra cost. But to you and your company, they may be worth every penny.

A shared conference room will offset your space requirement, but are you OK with having to schedule a conference well in advance of when you need the room? Can you secure the space when a client or investor is in town, or is it already booked?

Traditional office spaces aren’t always designed as well as coworking spaces. Landlords will pay to improve offices, but to get your space to match what you’re leaving, you might have to pay out of pocket.

Most coworking spaces in Orange County have paid parking. Would you be better of investing this parking cost into your company?

Moving on from a shared workspace is a huge step in your business evolution. Be sure you’ve thought through the commitments and costs of renting a commercial office before terminating your coworking lease agreement.

Are you uncertain about the right next step for your growing venture? Contact WindWater Real Estate today to discover the best opportunity for your business. 

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