As big enterprises move in to WeWork and other coworking spaces, other clients move out. But, is the excitement and frill of the coworking concept sustainable long-term?


Foundry, a digital product agency we represent, had previously been leasing space out of WeWork at Capella Tower, but were dealing with the nice problem of rapid growth and WeWork was no longer making sense from an expansion standpoint. In addition to the space issue, Foundry could not justify the coworking price for the size of their group and were finding a lack of privacy at WeWork that was inhibiting their processes. Foundry leadership quickly realized that the coworking offerings in the Twin Cities could no longer fit the needs of their business goals, so we began their search. We were looking for a space that could remain flexible on lease terms but was also move-in ready, providing a similar convenience to co-working sites.


The appeal of coworking sites is their ability to offer shorter-than-normal lease terms combined with the visual appeal of finished, high-quality, unique, move-in-ready office communities offering third work spaces.


With our client, Foundry, we were able to leverage our knowledge of the coworking lease structure—to balance the needs of the tenant—with our awareness of the landlord’s goal. In doing so, we were able to negotiate a 4,173 square-foot lease in one of Fifth Street Towers’ newly renovated spec suites. The space ties in many of the benefits of the coworking environment—for example, impressive third work spaces, dedicated and shared conference rooms, renovated lobbies and the desirable amenities that Class A & B buildings offer—but in a way that feels more intimate and owned by the tenants. This space not only accommodated the current needs of Foundry, but also provided growth options for their future projections.


We’ve mentioned spec suites, but what are they, really? Through partnering with design firms and furniture companies, landlords are building turnkey suites that offer easy, immediate and trendy space, which many tenants find attractive. These suites have the look and feel of high-end space without having to deal with a potential year-long, design-build process. Spec suites are successful for both landlords and tenants because they simplify the tenant move-in process, help tenants find the space that they want, and are often able to accommodate larger space needs, which has been an Achilles heel of many coworking groups.


Traditional landlords are taking this as a challenge and addressing it head-on. We see more landlords becoming amenable to shorter/flexible lease terms to offset the challenges of growth or uncertainty for new and existing tenants. For example, we have worked with landlords to incorporate in the lease that they will offer to move tenants within their building to accommodate growth or contraction, without penalty (again, should they stay in the building). This flexibility is doing its job to attract and retain tenants who may be used to, or more inclined towards, the coworking lease model.


While the coworking model hinders expansion and growth of smaller tenants (generally due to cost per square foot/per employee), larger enterprises are becoming more attracted to the model. Beyond the beer-on-tap, cozy workstations, community mixers and sparkling water, there is one thing that these coworking spaces (WeWork, Spaces, Industrious, etc.) cannot provide the employees of any given company: the sense of ownership, security and a place to call home.  According to a recent Forbes article, one of the main drivers of young-talent choosing a company is company culture, a sense of environment, and camaraderie amongst the team. The ability to move walls, change offices, not having set desks, lack of privacy, etc. are all factors that may hurt that sense of community. The excitement surrounding the model is loud, but with every growing bubble, there is ultimately a needle that makes it pop.


We will let you know when we see the needle coming…



Tom Hoffman

Senior Vice President

Colliers International | Minneapolis - St. Paul 

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September 6, 2019

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