Startups and Micro-Offices: How They Impact Your Bottom Line September 23, 2014 | Samantha Dubrow

Kids just aren’t like they used to be. Seriously, how many three-year-olds do you know who can work an iPad better than you can?

In 2000, millennials started to enter the workforce. Now, the dot-com bubble is long since forgotten, and 1 in 5 millennials wanted to quit their job to start their own business.
Millennials are changing organizational structure, marketing, technology, and culture. But most importantly for you, as a building manager: they are changing office spaces. Gone are the days when people want to work in private rooms with locked doors. With technology innovation comes the need for open spaces to facilitate collaboration. Millennials are literally breaking down walls.

STARTUPS ARE LOOKING FOR MODERN WORKSPACES

The first question is whether startups are prevalent enough to make you even think about adapting your office spaces toward them. On one hand, almost half of private-sector employees work for small businesses. On the other hand, many startups fail very quickly. 25% don’t make it past the first year, and 44% fail before their third anniversary. If you’re willing to try your luck and take the risk to adapt to these new workspaces, there are a few things you should consider.
 

1. New Companies Want Less Space per Employee

In 2004, the average office space for an individual employee was 250 square feet. Now, a decade later, the average space has dropped to 135 square feet. With nearly half the space per employee, office spaces have to adapt to keep full capacity.
It has been predicted that office spaces will continue to shrink to as small as 100 square feet per employee in the next five years. There are a few reasons for this. First, less office space is less expensive for tenants. Second, telecommuting and freelancing are more common than ever, reducing the amount of office space each company needs.

 

2. Open Space for Collaboration Breeds Innovation

Modern organizations believe that separated workstations hinder creativity. Common workspaces and open floor plans offer the freedom for continuous communication between team members. In new companies, the entire business plan can change after a spontaneous thirty-minute conversation. The ability to maintain flexibility for collaboration is invaluable.
With startup employees working together in confined spaces, they need to have overflow space to hold private meetings and phone calls. This calls for additional common space that several small companies share.
 

 

3. Startup Employees Work Strange Hours

One thing to keep in mind about startups is that their organizational structures aren’t necessarily fixed. Many employees will keep a day job while they are working for a startup part time, causing them to work nontraditional hours for the startup.
Long startup hours are something to consider if you want to adapt your buildings to fit their needs. Startup employees need a space where they can work until midnight if they need to, and they will need space in a building that will keep the heat running into the night while they work.

HOW TO MITIGATE THE RISK OF RENOVATING OFFICE SPACE

Building owners are right to take caution before renovating their office spaces. Especially since startups turn over so quickly, you should definitely consider how to handle potential vacant spaces as well as special needs such as long operating hours.
 

 

1. Bring in Companies that Specialize in Shared Office Spaces

Several companies offering shared office spaces, such as UberOffices and WeWork, have recently surfaced. These companies act as a single building tenant, and they find small companies and individuals who need a place to work to fill the space. UberOffices and WeWork pay rent and utilities to the building owners, and then bill back their rent to their tenants. This solves two major problems.

 

  • First, these companies will come and reconstruct the space, so you don’t have to pay the adaptation expenses. They have also been working closely with startups for years, and know exactly what they’re looking for, from call rooms with recliner chairs and glass doors to bullpens with balance ball chairs.

  • Second, companies such as UberOffices are responsible for finding tenants and keeping their space occupied. When tenants inevitably turn over, UberOffices continues to pay the cost of the space, taking the pressure off of the building owner to bring in new tenants.

 

 
A community manager from WeWork’s Charging Bull location in New York City, Madeline Taggart, describes WeWork as a place where companies come together to build a community. She stated that 60% of the companies who utilize WeWork office spaces have done work with other companies in the space. WeWork and UberOffices both constantly host networking events to engage their members and foster creativity. These companies have been quite successful, and they provide an opportunity for building owners to provide office spaces that fit startup needs, while mitigating their risk.

 

2. Submeter Buildings to Bill Back Utilities to Tenants

Once you decide you want to adapt your office spaces to fit the needs of startup tenants, you have to figure out the best way to bill them. One way to justify extra operating costs that come with longer work hours is to bill back the difference to your tenants.

If you are going to bring in a tenant like UberOffices or WeWork to use two floors of your building, you should submeter those floors and bill the company, which can then distribute the rent. On the other hand, if you want to have several companies on each floor of your building, without bringing in a single tenant to control the space, you should submeter by space, to separate office spaces and common spaces. Then, you can bill each tenant (1) based on the size of their their office space and (2) for their share of the common space. Submetering will make it significantly easier to bill your tenants, to ensure you get paid accurately for their expenses.

 

Startups and millennials in the workplace should not be ignored, because they will soon make up more than half of the workforce. If you’re looking to maintain risk aversion, but still want to adapt to startup needs, you have the opportunity to bring in a tenant company to sell shared office spaces. Organizations are continuing to move away from closed doors and independent offices, and catering to the next generation of workplace needs will be a competitive advantage for your buildings.

 

Office Space, Startups, Submetering, Tenant Billing

About The Author

When Samantha isn’t writing for the blog or managing our HR like a champ, she studies Organizational Psychology at George Washington University.