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PROPERTY ROTATION: OLDER COMMERCIAL STRUCTURES IN THE MODERN AMERICAN ECONOMY
SNEAPA 2016
OVERVIEW Many New England communities have older
commercial properties that are declining in utility, usage and value;
Firms in many modern growth industries do not require specialized new facilities for their operations;
Re-use of old, underused commercial buildings can benefit local communities and businesses, much like planting fallow land;
TRENDS The U.S. economy is shifting from
industrial to knowledge-based activities;
Technological innovations are disrupting the way Americans work and how modern businesses use real estate;
Businesses are using real estate differently in response to these developments
THE SHARED ECONOMY Small and medium-sized business are
successfully adapting to these changes by:
Sharing, rather than owning, resources; Promoting temporary (gig-based)
rather than permanent employment and
Relying on mobile and cloud-based infrastructure and activity
COWORKING In commercial real estate, this
adaptation has led to the rise of nearly 1,700 collaborative work spaces (co-working centers) around the USA, where buildings, equipment, services and skills are shared by multiple workers and small businesses;
COWORKING BENEFITS FOR BUSINESSES Collaborative workspaces benefit small,
modern businesses and independent workers by:
Reducing start-up, overhead and administrative costs for members through cost sharing;
Promoting transfer of skills, knowledge and services between members that enhances operations and fosters growth
COWORKING BENEFITS FOR LANDLORDS Re-use of older commercial buildings as collaborative
workspaces allows: Revenue per square foot to be maximized by
allowing space to be rented to multiple tenants across multiple revenue streams (desk rentals, service charges, etc.);
More robust revenue collection as vacancy losses are reduced across multiple tenants;
Low barriers to entry: in 2016, co-working spaces required an average of $100,000 in start-up costs (median $70,000).
FACTS ABOUT COWORKING SPACES The average co-working space in the U.S. hosts
110 members at 70 desks over 9,647 square feet (~140 sq. ft./desk and 88 sq. ft./member);
Only one-quarter (25%) of co-working spaces lose money. Most older (3+ years in business) and larger (50+ members) co-working spaces are profitable;
Space rentals comprise 63% of income for U.S. co-working spaces on average, with other service charges and fees comprising the remainder.
COWORKING TRENDS IN THE U.S. Co-working spaces are growing – average size
has doubled to 9,647 square feet since 2015; The utilization rate of desks at co-working
spaces has been growing, and was 52% in 2016; More space in co-working centers is being
devoted to private desks and dedicated work areas;
Employees now comprise half of all members of co-working centers, up from 34% in 2015;
CO-WORKING DYNAMICS IN THE U.S. In 2016, over half (55%) of co-working
spaces were located in formerly vacant buildings;
Nearly half (45%) of co-working spaces occupied buildings more than 50 years old;
Less than a third (31%) of co-working spaces are located in cities with more than one million people, one-third (33%) were located in small communities with less than 100,000 residents;
CASE STUDY: ARLINGTON, MASSACHUSETTS
In 2013, Arlington embarked on a concerted effort to attract collaborative workspace entrepreneurs to older commercial properties in its business districts to: revitalize their condition/appearance and increase their tax value to the town;
Arlington hosted two conferences in 2013 and 2014 where local property owners discussed collaborative working with founders of co-working spaces and their members.
CASE STUDY: ARLINGTON, MASSACHUSETTS
Arlington attracted co-working entrepreneurs to these conferences by marketing the town’s advantages: A highly-educated work force heavily focused in
professional, technical and creative occupations, with a high proportion of self-employed residents;
Superb transportation links, including transit (MBTA bus lines) and bicycle (Minuteman Bikeway);
Three unique, vibrant, thriving commercial districts with diverse mixtures of shops, restaurants and cultural attractions
CASE STUDY: ARLINGTON, MASSACHUSETTS
Result: In 2015, a year after the second conference, the owner of a historic, but under-utilized, mill in Arlington Heights agreed to rent 5,000 square feet of space to Workbar, Boston’s premier co-working firm.
The mill owner and Workbar shared renovation costs, yielding a modern, green, energy-efficient space;
Workbar Arlington, the firm’s first suburban hub, broke membership records, and was near full capacity in five months.
WORKBAR ARLINGTON, MASSACHUSETTS
CITY OF CAMBRIDGEPrivate Development - Kendall Square and Central Square Planning study (K2C2)
Innovation Office Space requirement (2013) Requires 5% of all non-residential GFA in PUD proposal be affordable
‘innovation space’ specifically to accommodate technology startup companies
Applies to all new office development in Kendall Square ‘innovation space’ defined as:
Continuous in increments of 20,000 sf or more Minimum of 50% of space devoted to shared common areas and resources Availability of flexible and short-term leases of 1 month No more than 10% of entire space may be leased by one company Privately-rentable suites no more than 200 sf
Public buildings - Foundry Building City contributing $6M Public private partnership between the City, CRA and a private entity
to develop and manage the space. As currently designed it will house both community uses, maker space
and innovation space.
CITY OF CAMBRIDGEOther tools in the toolbox:
Expedited Permitting & Licensing Support companies in need of special permits
In many cases, labs and life sciences uses fall outside zoned areas “as of right” Project Examples
Novartis Institutes for Biomedical Research (formerly New England Confectionary Co. (“Necco”) building)
Encouraging review of Table of Uses as part of broader city planning efforts
Project Examples: Lamplighter Brewing Co.
Needed special permit because “bottler” considered heavy industrial use Tax and CDBG-funded programs to enhance 1st floors
Support reuse of older buildings for retail and other street level active uses
Storefront Improvement, Small Business Enhancement, and Interior Accessibility Programs
Project Examples: Loyal Nine, Lamplighter Brewing Co., etc.
CAMBRIDGE, MASSACHUSETTS
SOMERVILLE ‘FABRICATION’ ZONING• Art Gallery: Display and sales of artwork• Artisan Enterprise: Production of hand-fabricated /
custom goods• Creative Studio:
• Cultural industries• Copyright industries• Content industries• Patent industries
• Culinary Incubator: shared commercial kitchen• Design and Fabrication Center: Tools for small
manufacturing• Fabrication Laboratory: DIY workshops• Work/Live creative studio: Living in an art studio• Delivery Business• Education too . . .
SOMERVILLE: INDUSTRIAL PROPERTY
ART GALLERYDISPLAY AND SALES OF ARTWORK
ARTISAN ENTERPRISEPRODUCTION OF HAND-MADE GOODS
CREATIVE STUDIOCULTURAL; COPYRIGHT; CONTENT; PATENT
CULINARY INCUBATORSHARED COMMERCIAL KITCHEN
DESIGN AND FABRICATION CENTERSHARED TOOLS FOR SMALL MANUFACTURING
DESIGN AND FABRICATION CENTERSHARED TOOLS FOR SMALL MANUFACTURING
FABRICATION LABORATORYDIY WORKSHOPS
WORK/LIVELIVE IN YOUR STUDIO
The Largest Cleantech Hardware Incubator in
the US, Located in Somerville,
Started in 2011 Home to 50+
cleantech hardware startups
Shared Prototyping Lab & Machine Shop
Commercialization Programs & Resources
Strategic Investors & Manufacturing programs
WHO WE ARE
29
ECOSYSTEM POSITION
Ideas & Technology in the Lab
Build a Business Plan & Begin Licensing
Refine Business Plan, Licensing, & Raise Seed Funding
PrototypePilot Testing, and First Customers
Mnfg & Multiple Customers
University Contest Accelerator Incubator Scale
Prize Wins Seed Funds Series A
WHAT WE LOOKED FOR IN A COMMUNITY
Test Bed for new technolo
gy
Existing communi
ty of makers
Access to public transit/alternative
transit
Personally
recruited by
Mayor
Empty affordabl
e industrial space
WHERE WE ARE
WORKBAR LLC Primary site selection criteria for new
co-working locations: Population density; Percent of workforce working from
home; Accessibility – transit/highway; Modern enterprise industries in vicinity
REFERENCE MATERIAL Greentown Labs – greentownlabs.com Workbar LLC – workbar.com Arlington, MA - arlingtonma.gov/departments/planning-community-
development/economic-development Cambridge, MA - cambridgema.gov/CDD/econdev Somerville, MA - somervillema.gov/departments/ospcd/economic-
development Coworking.com Deskmag.com “Deskmag/GCUCall - Coworking in the USA 2016 Survey”:
http://preview.tinyurl.com/hjmleuw M.signalvnoise.com Startupblink.com/blog/coworking-space-directories/
PRESENTERS: Ted Fields, Town of Natick, MA
[email protected] Devin Cole, Workbar Inc.
[email protected] Lisa Hemmerle, City of Cambridge, MA
[email protected] Micaelah Morris, Greentown Labs LLC
[email protected] George Proakis, City of Somerville, MA