In August, Connected Real Estate Magazine posed, the question, is co-working working? , due to news of flexible-office space provider Knotel facing lawsuits because of unpaid rents (and has since filed for bankruptcy) and WeWork shifting its focus on larger, corporate clients who’d likely have less trouble paying their rent during the COVID-19 pandemic.
It appears flexible office space provider The Yard believes that co-working is working. The company recently announced it will take over a now-defunct Courtyard by Marriot hotel at 8 Herald Square in New York, The Real Deal reports. The hotel closed permanently in September due to COVID-19-related financial difficulties. The Yard is currently converting the 76,000 square foot building into a flexible office space. Fourth and fifth floor hotel rooms will become private offices. The Yard co-founder Richard Beyda announced a partial opening for earlier this week.
In total, the conversion will create approximately 180 private offices. Meanwhile, the hotel’s third floor sky lobby will house conference rooms and co-working areas, according to The Real Deal. The Yard said the hotel’s gym and rooftop bar will remain as office amenities.
This is not the first time this building comprised offices—until 10 years ago, the property was an office building. It was not until 2009 that Hidrock Properties, through an organization called 960 Associates, acquired the building and converted it until a hotel. The Courtyard opened in 2013 and Hidrock sold its interest two years later at a $132 million valuation, according to the company’s website.
The Marriott site will be The Yard’s initial foray into operating under a management contract instead of a traditional lease, according to Beyda. The current agreement says the landlord will pay The Yard for leasing and managing offices. The arrangement is similar to how a hotel management and property owner work together. The company is now talking to other New York landlords about opening new location based on similar management agreements. The Yard currently has 13 sites in Philadelphia, New York and Washington, DC.
The COVID-19 pandemic is a part of the reason The Yard and other companies are seeking management agreements, according to The Real Deal. The pandemic exposed flexible office space providers’ vulnerabilities when they work under traditional leases. The Yard plans to continue with its leased-based locations, however. It just plans to use both models as the company expands.
“The dynamics [have] to be the same,” Beyda said. “The property has to be the right property. And economics needs to be the right economics. If you come in with a landlord, and you both have realistic expectations, and the location works, it should work.”
Joe Dyton can be reached at email@example.com.