Tag Archives: plano

WeWork – Will it Work in a Downturn?

Post By : admin 22 February 2018 Leave a comment

The New York Times just published a feature on WeWork called The WeWork Manifesto: First, Office Space. Next, the World. It’s a very interesting article about how WeWork has gone from start-up idea to a market valuation of $20 billion in only 8 years.

It’s a very interesting article and I really have to give credit to the co-founders for creating something that appears to be working so well. It’s good for companies to have options. WeWork is one of many providers of co-working space. It’s hip, cool and very open space. There are some real benefits to it – chief among them being flexibility since tenants don’t have to lock into long-term leases.

Co-working providers claim to save companies a huge amount of money while providing flexibility and the kind of space that younger employees want. This is true, but you have to remember that if you rent a dedicated desk in a co-working location, each person typically gets a 4-foot-wide table with another table immediately next to it for another person. So a typical 10-foot-by-12-foot office that you would give a staffer in a traditional office build-out, would likely have 4 people in it at a co-working office. While prices vary by location, those 4-foot tables go for $500 a month. So that one office costs $2,000 a month. It’s easy to see how co-working providers can afford to offer free beer and other amenities.

WeWork has been in business for 8 years now – all of which have been in an expanding economy. It will be interesting to see what happens when the economy takes a dip. I hope they do well, but I’m dubious. Practically every executive suite operator went under in the recession of the late 80’s and early 90’s and landlords ended up taking back the empty spaces left over. Since WeWork members are on month-to-month contracts, they can move out quickly if they start feeling the effects of a downturn and are trying to reduce cost. Thus, WeWork and other co-working providers will lose revenue much faster than building landlords whose tenants are committed to multi-year leases. That will put a major strain on their ability to stay in business, much less grow.

So while a recession may result in tough times for the operators of co-working locations and executive suites as well (think Regus), they remain a great option for tenants who need short-term space for projects or when testing the water in a new market.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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A Ban on Dual Agency Fails…For Now

Post By : admin 16 January 2018 Leave a comment

As you probably know, at REATA, we only represent users – companies that lease or buy office and warehouse space. We won’t take landlord listings for lease because it has the potential to create conflicts of interest.

Furthermore, we don’t think that real estate companies should be allowed to represent both sides of a transaction. That would mean that one agent in BrokerageCo (made up name) shouldn’t be allowed to represent the landlord or seller while another agent in the same BrokerageCo represents the tenant or buyer.

Fortunately, some powerful forces in the industry are starting to agree with us and take action to make this mandatory.

California Assembly Bill 1059 is legislation that was crafted to end “dual agency” (it’s called “intermediary” in Texas). While the specific provision ending this practice was removed from the bill before it made it to committee, the good news is that it was considered at all. It has to be discussed a few times before it actually becomes law.

This all began in 2007 when a Hong Kong businessman sued Coldwell Banker and its agents. He had been represented by a Coldwell Banker agent as had the seller. When a giant discrepancy was found in the size of the property he purchased (long after closing), he filed suit. It went all the way to the California Supreme Court which determined that Coldwell Banker failed in its fiduciary responsibility to him. That was a lightning bolt decision.

The United Kingdom is ahead of the USA on this issue. The Royal Institution of Chartered Surveyors (think of them as the UK version of the National Association of Realtors) in early 2017 created a policy statement with strict conflict-of-interest requirements which specifically bans the practice in the UK.

So the government and industry groups appear to be moving in the right direction. It will likely take several more years, but we’re hopeful that all concerned will do the right thing for clients whether legislation requires it or not.

A more-comprehensive article is available here if you want to learn more.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

Categories: Uncategorized

Tax Reform – Another 1986?

Post By : admin 21 November 2017 Leave a comment

Our government is talking about major tax reform. That will make you really nervous if you were in the commercial real estate business in the 1980’s. You will remember how a Republican president signed into law a tax law which killed our industry for 10 years.

Sure, much of the changes in that law were necessary and appropriate. But they changed the rules retroactively and that’s not fair. That meant that anyone who invested expecting a certain tax treatment got something totally different. When new laws are enacted, they should be for the future and not undermine and unravel everything that came before it.

The industry was building far too much in the way of supply given the demand back then. We haven’t seen supply and demand out of whack to that extent since. But talk of tax reform justifiably makes commercial builders and investors jittery so they are keeping a close eye on what’s going on in Washington.

Steve Brown of the Dallas Morning News quoted Ross Perot Jr. in an article recently (full article) saying, “all of us need to watch this tax code for unintended consequences.” We can’t trust the government to truly understand the consequences of the laws and codes they enact. So it’s the unintended consequences that make us most nervous.

With the president being a commercial real estate guy, hopefully he’ll have some clue as to the unintended consequences and won’t sign anything that will put us in recession like in 1986.

Stay tuned though.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

Categories: Uncategorized