If the co-working space industry is on the downturn, no one has told flexible office space provider Industrious. At a time when fellow co-working companies like Knotel are filing for bankruptcy, Industrious is looking to acquire more space, The Real Deal and Bisnow report. Industrious recently opened a 17,000 square foot site in New York’s Carnegie Hall Tower—it’s the third location the company launched in the city since the COVID-19 pandemic hit the United States.
Next month, Industrious plans to open two more locations in New York City totaling 113,000 square feet, according to The Real Deal. Meanwhile, the company has its sights set on opening at least part of a 100,000 square foot site at Vornado Realty Trust’s One Penn Plaza. If these openings are successful, New York will be Industrious’ largest market with 580,000 square feet of flexible office space.
Other co-working companies’ loss is Industrious’ gain
It would be quite a feat if Industrious had just opened the previously mentioned 580,000 square feet in New York. The flexible office space provider, which currently operates more than 100 locations totaling more than three million square feet, has plans for even more expansion in 2021, however. Industrious will expand its portfolio by 1 million square feet this year, per company spokesperson Corey Chambliss. A lot of that space is expected to come from locations that other co-working companies vacated, including five WeWork locations, people familiar with the situation told Bisnow. Locations include Washington, DC, Los Angeles, and Chicago along with New York.
“We added more than one million square feet of new space last year, and some of those locations included pre-built spaces where another flex operator didn’t work out,” Industrious CEO and co-founder Jamie Hodari told Bisnow. “We’re proud to partner with landlords to improve outcomes for their spaces when there’s a good fit, and it’s clear there are increasingly more opportunities to do just that.”
Flexibility is key to Industrious’ success
So how can Industrious continue to expand its co-working space portfolio while other companies in the industry are trending in the other direction? Company executives believe its business strategy that includes signing agreements with landlords instead of the traditional leases has helped Industrious stay afloat.
“We partner with landlords on these spaces, so there’s not a high fixed rent component,” Industrious Director of Real Estate Doug Feinberg told The Real Deal. “When you’re in a downturn or you’re in a pandemic, your unit might not be performing as well, but in our case, we share on the upside, and we share on the downside.”
A lot of flexible office providers sign traditional leases that leave them responsible for long-term costs and inconsistent income streams, according to JLL Director of U.S. office research Scott Homa. Industrious instead enters agreements similar to ones hotel operators and building owners sign. The company receives a management fee and a portion of the profits from its spaces based on performance. This business model has helped Industrious navigate the COVID-19 pandemic because it shares the risk and gives the company partners to work with to get through the difficulties that come during a health crisis, according to Hodari.
Brooklyn-based developer LIVWRK is a landlord that benefitted from Industrious’ business model, according to The Real Deal. LIVWRK partnered with Industrious after co-working company Ignitia went out of business last year. While landlords typically want to lock tenants into long-term leases with annual 2% to 3% rent increases, LIVWRK Executive Vice President Matt Ciccotti recognizes tenants are almost always seeking flexible options.
“From a landlord perspective, it’s all about striking the right balance between retaining the investment value of the building and offering our tenants what they want,” Ciccotti said.
Joe Dyton can be reached at email@example.com.