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A Recession is a Great Time to Launch a Coworking Space: Insights from a Veteran Workspace Operator

Satellite Deskworks founder and CEO Barbara Sprengers has been through five recessions. Twice, she started a business during a recession.

From her perspective, this is a great time to launch a coworking space.

Here are five reasons why:

1. Lower Rent

Landlords want their buildings to be occupied. During a recession, commercial real estate rates drop and landlords are more aggressive in negotiating to fill their spaces. This gives you an opportunity to secure a lease that can help you over the startup period.

2. Lower Expenses

You haven’t hired staff or maybe you don’t plan on hiring staff, initially. Take this lean time to get your business model, membership options, and operations in place.

3. Discounted Amenities

During a recession, you may be able to secure discounts on furniture and equipment, such as printers and monitors, tables and chairs, phone booths, and more. Dealers are desperate to offload merchandise and make sales so they may be willing to cut you a great deal.

4. Focused Attention

Service providers, dealers, brokers, and landlords have a little more time during a recession so they’re happy to talk with you in-depth. This means they can focus on your business and needs. These conversations will educate you about their offerings, the industry, and how they can best help you.

5. Free Rent

Since your landlord knows it’s a recession, you can get a longer period of free rent. For example, in one of Sprenger’s new spaces, she got three months of construction, four months free rent, and about 10x monthly rent for construction costs.

More Recession ProTips

Lock in an agreeable lease: If you’re starting up and signing a new lease during a time of low inflation, be careful to lock in your increases over 5-7 years. Try to lock in increases of 2% per year.

Be sure you get an option: If you do a 5-year lease, try to get an option locked in for the next five years. Otherwise, you’ll have to sign a new lease at the five-year mark or leave the space you’ve built up as a viable business.

If rates are good at that point, the landlord may raise your rate beyond a workable limit. If you have an option, they must let you exercise it and stay in the space.

Sprenger explains, “The landlord will try to insist that the option is at market rate but that landlord is not going to have to pay commissions in the way he normally would. So you may be able to get an option rate that’s at 95% of the market rate.”

She adds, “If possible, get a follow-on option for your option period. Remember, the option becomes the floor of what your renewal will be. You may be able to negotiate a better rate or some additional Tenant Improvement funds.”

Satellite Deskworks coworking management software gives you the flexibility and power you need to run a profitable, sustainable workspace business. Request a free demo to learn more.

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