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Outgrowing Coworking: A Guide to Knowing When A Company Outgrows Their Coworking Space

10/28/2024 ECR News

Recently touted as Silicon Hills, Austin has become a large innovation hub for early-stage startups. These startups aren’t operating outside the founder’s childhood home’s garage. Capital Factory, WeWork, and Industrious have provided an innovative playground for companies to grow thanks to the rise of flexible office coworking space in the city over the last decade.

While coworking can be an excellent starter for a new idea, eventually, the real winners in the startup world move on to grabbing their own office space. But doing so can be daunting, especially if the founding team is looking for traditional office space for the first time. We spoke with three tenured Office Leasing Brokers to get their insights on what growing companies should look for when signing their first lease.

 

  1. Have realistic expectations when looking for a new home for your company. While leasing a coworking space can be quick (it’s labeled in the industry as flexible for a reason), companies should “expect longer lease commitments compared to coworking (though there are exceptions) and a longer process to identifying/securing a space” Sean Couey shares. Couey adds that tenants shouldn’t get cold feet with the commitment as most of the office space in the Austin market provides tenants with “more flexibility to make the space your own once you’re in.”
  2. Assess Your Needs. Every company is different; a law firm needs a significantly different office layout than an AI-centric tech company. Rebecca Zigterman suggests “play around with proven tools like our leasing calculator.” She adds that “companies should have a good grasp on their office needs to effectively know where to start” when searching for the right fit.
  3. Do the math. Once you understand your office needs well, it becomes a numbers game. With coworking spaces starting at $2400/mt for membership and just 97 SF (aka two dedicated seats), early startups can benefit from affordable pricing but need more space to work with. In contrast, a doubled-sized space (200 SF) can go for as low as $1400/mt at a property like 1502 West Ave. That’s a $1000/mt savings on paper, but what a company wants to do with the space determines the cost per headcount. While traditional offices lack the fancy on-tap kombucha and other amenities, they potentially provide some monthly savings. Broker David Dawkins suggests companies consider their headcount when determining the timing of transitioning. “Often when a company grows beyond 12 people, the costs of coworking start to exceed the cost of leasing direct,” Dawkins shares.
  4. Look (and walk) around. Given the current office market, there’s likely availability within walking distance of a company’s coworking space. Taking a lunch break to walk around and see what’s available nearby is a great place to start when transitioning to your office. A tenant-rep experienced broker can best use your time here, as they can help you tour readily available spaces based on your preferences.
  5. Determine Your Growth Rate. Not all companies grow simultaneously, so the above calculations are fluid based on what’s happening within each company. Coworking spaces provide companies with great flexibility, but traditional office spaces have their fair share. Dawkins suggests “subleasing as a great strategy for taking advantage of below market rents, maintaining flexibility via a shorter lease term, and strategically positioning the firm for growth.” Depending on where a company is in a funding cycle often plays a significant role in what direction they ultimately choose.
  6. Look to lighten the load. Most companies looking to grow into their first office space rely on the founder’s bandwidth for decision-making. We all know that a founder’s to-do list is exponentially long, especially when a company is in the early stages of startup, so looking for your next move probably isn’t at the top. Sitting down with a broker specializing in tenant representation can save you weeks of work to find the right fit while providing financial savings.

 

When moving out of coworking, companies have seen many benefits to calling a space their own that go beyond just the financial savings. With the increased level of customizability, there becomes a stronger brand identity, which 91% of employees believe affects their attitude towards work. We also see increased team cohesion, with 70% of professionals reporting that having dedicated spaces for collaboration and interaction boosts teamwork and innovation [Leesman Index].

The quiet kicker: having your office space allows companies to limit distractions and noise from traditional coworking neighbors, allowing for increased efficiency via deep work focus.

The Final Buzzer:

It ultimately comes down to your company’s needs and values. When running a pure numbers game, we see a cost analysis inflection point early in a company’s journey. Knowing when to step towards calling a space alone doesn’t mean you have to be alone. At ECR, we specialize in local Austin tenant representation and would happily consult your team on your unique situation.

Contact ECR today to learn more about the top office areas in Austin and how we can help your business grow!

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