311. Why you Need to be Prepared to Sell a Landlord on You and your Business Model

Everything Coworking Featured Resources:

TRANSCRIPTION

311. Why you Need to be Prepared to Sell a Landlord on You and your Business Model

00:00:02,"Welcome to the Everything Coworking podcast, where every week I keep you updated on the latest trends and how-tos in Coworking. I owned and operated Coworking spaces for eight years, and then served as the executive director of the Global Workspace Association for five years. And today, I work with hundreds of operators and community managers every month, allowing me to bring you thought-provoking operator,"

00:00:29,"case studies and inspirational interviews with industry thought leaders to help you confidently stay on top of what's important and what you can apply to your own role in the Coworking industry. Welcome to the Everything Coworking Podcast. This is your host, Jamie Russo. Thank you for joining me today. So we're gonna dive into a short topic that I think it's relevant to you whether or not you are a new operator or an operator that is looking for additional locations."

00:01:08,"So I think we are at a time in the market at the time of this recording during which operators both new and experienced assume that landlords are thrilled if we want to look at their space, that building owners of commercial office space are under duress in general and are looking for occupancy and will take any offer that comes their way. And this, in most markets today is not the case."

00:01:43,"Yes, there are high vacancy rates, rates in a lot of markets, 25%, sometimes higher, totally depends on the market. And I don't know anything about vacancy rates outside of the us. The US does vary greatly, but we see even major markets like Dallas with vacancy rates at 25%, 27%, which is a lot higher than historical average. And we don't know if that's settled out."

00:02:10,"Will that continue? Will that rate go higher? So again, we would tend to think, okay, if there's less demand, then it's easier than ever to get space to get a deal from a landlord, et cetera. And that is just not always the case. So I'm working with folks who are looking for space. A lot of this feedback comes from Giovanni Vicini,"

00:02:34,"who is my co-host on, or I am his co-host, I should say, on the Flex Uncentered podcast. And he gives me the boots-on-the-street view of how asset owners are thinking today. And I get the feedback from our Coworking, Startup, School folks, anybody who's looking for a lease. We're also talking to a lot of asset owners today."

00:02:57,"That segment of folks has been calling and emailing and thinking about doing flex themselves and trying to understand the market. But back to an operator looking to sign a lease, let's start with new operators. So a new operator, again, it's market dependent. If you're looking for a couple thousand square feet in a small market, you may be just fine doing a simple deal with a landlord."

00:03:28,"They may be quite happy to sign a deal with a Startup. They may prefer you to other options for the space, like a nail salon for example. So you may not run into this, but anybody in Florida, for example, which has pretty high demand for even commercial real estate and even markets where there is a high vacancy asset owners are just becoming more risk averse,"

00:03:58,"right? So even when they really want occupancy, they want occupancy from a tenant that they know will stick around, especially because if you are negotiating the deal that you should be negotiating as a Coworking space operator, you need a lot of help with tenant improvement and you need a lot of free rent. So there's a lot of concessions that you're looking for in that package."

00:04:22,"And if you're a new operator, you are essentially a Startup. So you are unproven, you are risky, and you must be very careful about how you present yourself to the landlord. And that's one of the things that Geo and I talk about a lot in terms of how to prepare folks to have those conversations. Because the landlord's broker is usually who you're talking to,"

00:04:45,"and oftentimes they're sophisticated. They work for a larger brokerages houses, and they are filtering out who they will present to the landlord. And they are, it's their job to present the best candidates to the asset owner. And so they're listening to everything you say, they're listening to your side conversations. If you're there with the business partner and you're not on the same page,"

00:05:10,"if you're not confident in your answers, if you don't present well, if they sense uncertainty, if they sense financial constraints, if they sense any of those challenges when you're in front of them, you are not gonna be perceived as a strong candidate. It's a little like a job interview. So I think that our perception may be that the landlord is selling us on the space when in fact we are still very much selling ourselves to the asset owner and trying to present as a quality tenant."

00:05:47,"So here, geo had recommended to one of the folks that I'm working with, Hey, you should put together a pitch deck for the landlord, which we've had folks in our program do before. And so I'm just giving some more thought to this because now more than ever, that pitch deck is really important, especially because we have so many folks coming through our programs now that are doing somewhat unique concepts."

00:06:14,"So if it's strict office space, if you are doing pretty dense office space, you look maybe like a Regis just as a as one side of the spectrum, right? They understand that model a little bit more. If you have some other aspects to your model, childcare, a specific niche, you're gonna host a lot of events, there's something unique about your model and you're not presenting it as pretty straightforward,"

00:06:47,"flexible office space, then that may not be as clear cut. They may perceive some risk to that. You need to tell them a story. So you need to still do the basics. You want to demonstrate that you have complete understanding of your business model, the market analysis, so you know that you can show them that you've done the due diligence to prove that your business model works in this particular market where the building is located."

00:07:19,"You want clear financial projections. They may not understand the business model, but they want to see that you are a legitimate business person and that you've done the work. You have the numbers. And if you're not comfortable with the numbers, then you need to hire a coach to get you there. You need to have a profor, a 10 year proforma."

00:07:38,"You need to have a pretty good handle on estimated Startup costs and what you need to make your entrance into that building successful and what it looks like over time, including the rent rate that would be appropriate for that building. They need to know that you know how to run this business. So you may never have run that business before. I have a lot of pro folks who go through our program who use,"

00:08:05,"who will say they're getting pro professional expert training. They'll use me as an advisor in their pitch deck. You wanna prove that you're taking the steps to really understand and set yourself up for success with this business model, in addition to showing that you have a track record of professional success if you're new to Coworking. Because if you're new to Coworking, then you are an extreme risk to them,"

00:08:32,"right? You are signing a lease, committing to pay tens of thousands of dollars, maybe hundreds of thousands of dollars in rent every year to them. And what if your business doesn't work? So they want to be confident that you know what you're doing and that your business is going to work. So what evidence can you show them that you have done something similar before,"

00:08:56,"that you're getting expert support, that you're setting yourself up to make sure you can pay their rent If you wanna show some sort of track record, if you are an experienced operator, then you wanna be pretty transparent about the success that you've had in your business. Not that you have to immediately show them financials, but do be prepared, especially if you're a new operator and you,"

00:09:20,"if you're an experienced operator, you just may not remember from your first rodeo on signing a lease. You have to handle over all of your personal financial documents. The asset owner wants to know essentially what your net worth is. So every asset, every investment account, every liability that you have to paint a really specific picture. And if that number doesn't line up with the level of risk that you're taking on,"

00:09:50,"then they may not deem you a qualified candidate, your business. So essentially, be prepared to be really transparent and share everything, even if you feel like it's none of their business, it is because they're taking the risk, especially if they're funding tenant improvement dollars. So you wanna show either a track record of being successful in other endeavors if that's working for someone."

00:10:13,"You're gonna have to paint that picture and figure out how to, how to sh show is the word. I'm looking like transferable skills. If you are already running a Coworking space, then how can you demonstrate using financial documents, the track record that you've had of paying rent on this location and how you're qualified to take on the risk of another location, and you really wanna tell the story."

00:10:41,"So you may encounter an asset owner or a broker who's just really focused on just the facts, ma'am, and they aren't excited at all about the concept of Coworking in the building. You may find asset owners who do care about what their tenant mix looks like, who are interested in having flexible workspace in their building. Is there a potential future collaboration? Do they like it as an opportunity to market this as an amenity for the building?"

00:11:13,"Are they just really excited about the concept? Do they see that as a future way of working? Do they like your particular take on the concept? Maybe you never know asset owners or humans too, with their own passions, their own interests, and sometimes their own commitment to the community. And they may get excited about your concept, they may not."

00:11:34,"So you can never fall in love with one specific asset because you never know what's behind, what the asset owner is, what their motivations are, what their risk tolerance is, et cetera. But you wanna paint that story. So make sure you look qualified, make sure you look confident, make sure you can show some sort of track record of success."

00:11:59,"Try to take, reduce the perception of risk as much as possible, and then get to the fun part where you're painting a vision and sharing your vision around what the space can look like. And a pitch deck can be done in Canva. There are probably samples in there. You can use screenshots of your proforma in there. You can make it look pretty,"

00:12:20,"you can use your brand colors, and if you haven't figured all of that out yet, they don't know that, right? So just start with something, and if it changes later, that's fine. Make it easy to digest. So while they wanna see this information, they don't wanna spend an hour going through your business plan, right? They want something really scannable,"

00:12:38,"and if they want more detail, they'll ask you, and maybe you have to do a meeting and kind of do a presentation, et cetera. But the other advantage of having a pitch deck in place is that you have been forced to work through the messaging, and you are fully prepared to give your elevator pitch when you're meeting with a broker. Or if you get,"

00:13:00,"if you talk directly to the landlord, which frankly you're pretty probably not gonna do, what's really gonna be the conversation between the brokers, unless you are working on a management agreement and you are an experienced operator, it's very hard to get a management agreement if you are a new operator with no track record. So that pitch deck really forces you to know your own story and have your messaging really tight and clear,"

00:13:24,"especially if you have a business partner, because you don't wanna be in a meeting and be going back and forth and looking at the other person and checking in to see is that, is that what we're thinking? So it'll force you to get really aligned. You don't have to spend weeks on this. It can be a good power session where you just get really aligned,"

00:13:44,"get through the messaging, put in some compelling visuals, tell your story. The work though, will be in making sure you understand the local market, that you've done your business plan, that you have your numbers in place, that you've worked on, your proforma. All of that does take work, but you should do that before you sign a lease anyway,"

00:14:01,"right? You need to know exactly what you're looking for. You need to have that box around your requirements so that you can find the space that matches your goals for your business. So I just wanted to mention that because it's been coming up a lot, and I think there's a misperception that there's some de desperation among asset owners, but that financial strain makes them oftentimes more risk averse than ever before."

00:14:27,"And so the responsibility is on you to help tell the story and reduce that risk. All right? That is it for this week, and if you are looking for expert coaching, we certainly offer that. We have a team of coaches that can help you with your proforma, with your pitch deck, with your market analysis, with your projections, all of those things."

00:14:52,"Head over to Everything Coworking dot com to set up a discovery call and see how we can help. Thank you for listening to today's episode. If you like what you heard, tell a friend, hit that subscribe button and leave us a rating and review. It makes a huge difference in helping others like you find us. If you'd like to learn more about our education and coaching programs,"

00:15:19,"head over to Everything Coworking dot com. We'll see you next week."

For the full show notes of this episode, click here.

Want to join our coworking conversation in the Everything Coworking Facebook Group? Find us here!

Looking for a specific episode? Go to the episode index here.

.

Jamie RussoComment