Pop Up Office?

By Ken Ashley 

(LOS ANGELES) September 10th, 2010 

We’ve observed the resurgence of the trend of so called pop up retail over the past year or so with interest. The concept can apply to any holiday store (those stores where you buy your Halloween costume are an example). It is also being used by toy companies and retailers of high-end clothing. The short term nature of the opportunity makes it cool to many (“Limited Time Opportunity!”) and since the commitment is very limited, the financial risk is minimal. 

The same idea can be found in restaurants where proprietors can be up in running in no time and with very little capital. This New York Times article profiles a number of offerings in San Francisco that cooking up or at least serving yummy things in  temporary space. 

So, can pop up work in office? This is not an entirely new idea. For years project teams have moved around offices in accounting, engineering and in all types of consulting gigs. But these spaces are usually inside existing semi-permanent space and long term leased office space. And yes there are executive suites which will allow one to office for a pretty penny, but this is like renting a hotel room vs. an apartment. Executive  suites are a solution, but they have their drawbacks. 

We hear from companies that want to start a beachhead in another city or from entrepreneurs that they want a sense of identity, security and the ability to 

The ultimate Pop Up office?

 

function with some independence for a short term. The traditional solution for this requirement is to find a cheap sublease and hunker down. This takes time, and carries with it risk that the sublandlord fails to pay their own obligation and the subtenant gets evicted. In addition, subleases are looked at as an afterthought by landlords and getting a document negotiated and approved can be painful. 

In the last downturn, several landlords offered so called “smart office” suites that were built-out for small offices with fresh carpet and paint. They were ready to go at a moment’s notice IF you liked the layout the landlord had built for you including the “sheetrock” walls. Back then you still had to rent a copier and deal with cabling issues. They weren’t really that temporary. 

Now with changes in wireless technology, advances by furniture purveyors and all the office vacancy around the US, we wonder if pop up office V2 will spring to life? 

Picture the scene; a company wants to open an office for 6 months in Chicago to determine if a new division can make it (Tempco, lets call it). Tempco’s forward thinking landlord offers to lease space in a designated area of a building for only 6 months. Tempco works with the landlord, furniture vendors and the communications guys to develop a beautiful, completely wireless and short-term solution. 

Perhaps the landlord makes things even easier by offering a short license agreement running a few pages as opposed to a huge lease. The other vendors could have the equivalent of an Amazon.com where one could point and click their way to leasing furniture and gear that meet their needs. 

Then, after 6 months, it can all go away. No fuss, no muss. 

The landlord gets revenue on otherwise empty space, and likey at a higher rate per foot than normal. The furniture and phone folks get to earn revenue on their mountains of existing inventory. Tempco gets exactly what it needs in the meantime. 

And maybe, just maybe because the landlord was so progressive and accommodating, when Tempco becomes the next growth company in Chicago the accommodating landlord gets the first bite at the apple for a much bigger and traditional office need. All those serving Tempco have the opportunity to develop a relationship, which many in the product business could use in this and every economy. 

So, to our friends in the landlord community: we challenge you to think outside the “pop up” box on a short term and creatively different basis. We will certainly be happy to write about real world examples of pop up real estate in office; just reach out to us.

3 responses to “Pop Up Office?

  1. Particularly great idea for those investors who are buying distressed buildings with an eye toward future appreciation (i.e., higher rents and occupancy rates). The buildings are being bought (in many cases) for such low psf prices, the temp office license rates could be pretty aggressive (great for Tempco) but still beneficial to the LL. The proverbial win/win…

  2. This concept works very well for a property that needs to create some leasing momentum. Unfortunately, many landlords are tied to restrictive covevnants from their lender which prevent such a creative revenue generator. With commercial buildings being valued by their long-term income stream, this solution doesn’t increase the value of the building so it makes landlords reluctant to take a bold step. When I was on the landlord side with a small REIT, we did these short deals routinely and it worked out well for everyone. I strongly agree with your concept, however, it may need to be limited to properties with high vacancy levels. Great article!

  3. We have done very well in turning short term leases into long term solutions for many of our tenants. We have had several tenants that have started with a 6 month lease and stayed around for several years. One tenant has surpassed the 20-year mark. Another is going on 6-years, and we just past 2 years with a tenant that has slowly expanded as business has picked up taking one office at a time every 6 months. We also had several come for six months and leave after they tested out their business plan and found that it was not working. As long as you are providing the services they need right at move in, usually they prefer the no hassle method rather than having to start from bare space and make all the decorating and technical decisions. Most of the small space needs are a one person shop and they need immediate solutions to take care of their needs. Our specialty is the one room office, but we have several suites with connecting offices allowing room for growth. Most of our offices are turn-key ready to sit down and go to work. In many cases a phone line is not needed right away because everyone is wireless, but an immediate secure redundant internet connection is as important as the air we breathe. Potential tenants want no long term contracts on anything so they can fail fast if need be and move on to the next venture. If it works, then their client base knows where they are and they stick around. It is truly a win/win.

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