Unused Offices – Trade Observer
The impact of the pandemic on coworking could be described as throwing it against the wall and seeing which concepts survived the impact and in what form.
BC (before COVID) there was basically a type of coworking, a place where you could take your startup and mingle with other startups, although a few coworking companies tried to offer turnkey offices. Then you’ve seen more established companies trying to take advantage of the cooler weather and look for places for their employees. Think IBM leasing 70,000 square feet for a while of WeWork at 88 University Place.
AD (after illness) it seemed there were more concepts than businesses. Industrious and stressed turnkey space for small startups. There was Daybase, providing spaces in suburbs and suburban towns where satellites could happen — or where people who wanted to get out of the house but not come all the way to town could ply their trade.
Even the company most identified with the trend, WeWork, has changed over time. In May, WeWork’s global head of real estate, Peter Greenspan, told Trade Observer the company strived to provide product diversity rather than one size fits all.
Here is yet another version of the flexible desktop product. Manhattan-based trot, founded in 2020 and officially launched in June, aims to be the Airbnb of offices, taking advantage of unused workspaces and placing them in a central location online, to rent for a much shorter term than the typical commercial lease , which starts around five years and can run out for up to 30 years. Trot does not own or manage offices. All it does is let the public know that they are available.
According to a spokeswoman, 30 listings, or about 41% of the total, are furnished.
Trot founder and CEO David Menaged took the time a few weeks ago to explain Trot and how it works. His remarks have been edited for length and clarity.
Business Observer: Tell me what Trot is and how it differs from other coworking businesses.
David Ménaged: Of course. Trot is an online marketplace. People can completely communicate on Trot with each other. It’s landlords and tenants and brokers with landlords. They can also transact on our platform. All agreements are simplified, signed on the platform; there is no exchange of papers.
It is a platform for owners to list their commercial spaces. Ads are free. There are photos, there are plans. There are virtual tours of each of the spaces, complete descriptions of it. And tenants come – we call them trotters – they come to the platform, they can browse the market, they can chat with landlords, they can arrange in-person tours of the space they’re interested in. And they can actually come back and sign licenses for the space for three-month intervals.
How many markets are you in and what are these markets?
Right now, we’re mostly in New York. We officially have one building, but two buildings are under construction in New Jersey. At the moment, we are mainly in New York.
We have 20 buildings officially on the platform right now. We have five other buildings in the integration process, where we are doing photography, plans and data points. And we have agreements with other landlords, collectively, on probably 20 buildings, but it’s 10 different landlords. Also New York.
So as I understand there is no actual branded Trot space. These spaces are still essentially the owner’s space. So it’s different from WeWork. When you go to a WeWork, you go to a WeWork outlet. You strive to be more of an Airbnb model.
It is very correct. We are an online marketplace allowing owners and users to transact like never before. The current market that exists, which was kind of delivered to the world, was made up of third-party operators. This may be a space actually leased by the third-party operator to an owner. Or it could be a company entering into a management agreement with the property. But these spaces are marked as this operator.
Whereas with Trot, we are not an office space solution per se. We are a digital platform where existing players in the given industry will continue to do business as they have done in terms of fair deal structure but just in a very new way that they haven’t never done before.
And we’re really streamlining the flex industry. He keeps the power, so to speak, where he always has been since time immemorial. Who is with the owners, with the tenants and with the brokers.
Where do you see yourself going in a few years, or where do you at least hope to go?
I hope we will be among the top 20 markets in the United States and surrounding areas within two years.
It really is a simplified solution. So in terms of local on-premises infrastructure for us to scale the model, there really isn’t much. There are positions we will need. But we never build a space. We will never actually furnish a space. We actually rely on existing players to do what they do best, which is to manage their properties.
So in terms of scaling, it’s just getting the word out and showing landlords and tenants that this is how they should be renting office space short term. Once that happens our hope and prayer is that it will spread like wildfire and that we will be coast to coast in the best markets and surrounding areas.
How does Trot work and how does it make money?
We have a performance-based model. We do not charge for ads. We don’t ask owners to entrust their listings specifically to Trot. In other words, they could continue to market all the long-term offers that they currently market, with their agents, without any disruption. And when a trotter comes to the platform and rents a space, we take a fee, which is 10%.
We believe flexible space and short term office space should be another tool in the owners shed.
How does Airbnb play into this? It seems in some ways that you are running an Airbnb model, and some of your PRs actually say so. So how do you compare what you do with what Airbnb does?
It could be Airbnb or one of the other platform companies that have revolutionized their industries. We hope to be similar to Airbnb in that it is a short-term rental space, whether for vacation homes or accommodations in any city in the world.
It brings it home because it’s such a famous company. Thus, by making this correlation, we are able to show how we are different from the coworking operators that are currently on the market. How does Airbnb play into this? I do not know. I hope I aspire to be as successful as these guys. And as revolutionary as they are. I say hats off to them.
You see a difference between flexible space and coworking. Tell me a bit about that.
Sure. Coworking is therefore a type of flexible space. Coworking is your typical WeWork or Industrious where you enter the space, the space is beautiful. They have their share of open plans, they have passes so you can always find people sitting in the social areas, like in booths or in the pantry or somewhere around there. And they have this set of private offices. So even though they’re from different companies, they’re kind of your colleagues in a way, because you’re with them.
Flex is just a short-term space. You have the ability to do what you might not necessarily have had the ability to do under a long-term lease, which is essentially an indefinite term. So flex, I see, is really a whole category.
Until now, there weren’t really any private suites. There have been, but it hasn’t really exploded in the market — private suites on a flexible basis. And I think that’s the real growth of flexible offices, because I think a lot of people still want their own offices. There are people who want to be in coworking places, and it’s great to develop a bit of a social network; and, maybe after work, making friends, there’s definitely a benefit to that. I’m not saying here that it has no place in the market.
I just believe that the vast majority of people are deprived of their stuff and want to be in their own space.
So you see the market changing, and it will probably continue to change.
I would say it’s not even the market it was two years ago. What everyone has seen – and I think this is without exception – is that the world changes in no time. You know, when it was maybe March 13 or 14, 2020. And then March 15 or 16, everything was different. So people have realized the value of flexibility and the ability to rotate at all times. Whether it’s people leaving cities that were in severe lockdown, to warmer climates like Florida that weren’t as locked down. Or if it was the companies that had the right to terminate their lease, so they had an element of flexibility, in quotes, rather than the people who were stuck in a 10-year contract.
So, yes, the market has evolved, and I believe it will continue to evolve. It’s just a sign of the times.
We may not be off the hook. Interest rates continue to rise, and a number of economists are predicting a recession and a reversal of the kind of low unemployment rates we have seen. Do you see the market for your business going straight up? Or do you foresee tougher times for yours and other businesses?
I think the tough times just present their set of challenges. There are challenges all the time. From our point of view, we are a low-cost company. We have some 200,000 feet on the platform and another 100,000 feet en route. We can run very, very similar expenses and have 2 million feet on the platform. So we don’t have those big maintenance bills and debts that we insure to transact on such a large pool of space. In terms of our business, I think that’s actually a very healthy model for getting through tough times.
As for businesses in general, I think that goes back to my first answer. I think every market and every economic state we find ourselves in has its challenges. They are just different when the market is down, but they are there when the market is going up. It’s easy to get carried away with negativity when the market is bad. What I’m saying is that there are always challenges and there are always opportunities. I think some of the biggest opportunities are where the market is weakest.
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