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Can I Turn Unused Office Space Into a Coworking Space?

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Turning your unused office space into a coworking space is a practical way to earn income. Landlords having difficulty attracting tenants may see turning their space into a coworking space as a unique opportunity to draw in a different range of tenants.

Tenants, on the other hand, may also utilise this idea if they have rented out space too large for their business and have additional space to spare. This article explores how a landlord and tenant can turn unused office space into a coworking space.

I Am a Landlord. How Can I Turn My Unused Office Space Into a Coworking Space?

Turning unused office space into a coworking space is becoming increasingly popular. There is great demand for it, which landlords of office spaces can use to their advantage.

One of the critical elements of leasing a property is that the tenant has exclusive use of the premisesIn contrast, a coworking space sees its members share the space and facilities. Here, there is a licensing arrangement in place. As the landlord, you will need to ensure you prepare a reasonable licence agreement to implement between you and the coworking space members.

Coworking Space Licensing Agreement

A coworking space licence agreement is an agreement between the owners of the coworking space and those that wish to use it. It sets out the terms of the relationship and each party’s obligations.

Often, a coworking space licence agreement accompanies coworking space rules. The rules will outline policies on acceptable conduct and include rules about issues like:

  • noise;
  • harassment; and
  • drug and alcohol use.

There are a few key things that your licence should cover, including:

  • membership fees;
  • length of agreement;
  • permitted use;
  • termination;
  • included facilities; and
  • insurance.

How Can I Increase Membership?

With the growing number of coworking spaces available for businesses to use, you want to ensure your offering is has a strong position in a competitive market.

Taking the following into account will help you increase the number of members your coworking space attracts:

Technology Most businesses cannot efficiently function without the internet. To ensure that your coworking space can service these businesses, ensure you provide:
  • constant internet connectivity; and
  • wifi access or a hire wire alternative.

Onsite technology support is another feature that larger coworking spaces are offering.

Fees Research the rates of coworking spaces around you. Look at how much they are charging and what they are offering as part of their membership to ensure that you are offering a competitive membership.
Facilities Will you offer professional meeting rooms, conference call facilities and a reception desk? Businesses in a coworking space will likely expect professional facilities where they can conduct business as they would in any other office.

Do you offer a range of options to cater to different business? Some members may be individuals and others may be a larger group of six to eight people that would like a more private area.

Considering the type of clients you want to attract is a good first step in deciding the direction you would like the coworking space to take.

Culture Good culture in your coworking space will ensure that you:
  • retain current members; and
  • regularly attract new ones.

Whether this involves offering Friday night drinks, a games room or hosting nights with speakers for professional development, your members will appreciate it.

I Am a Tenant. How Can I Turn My Unused Office Space Into a Coworking Space?

Diving right in and offering spare desks to other businesses in your oversized office may seem like a good way to use the space and reduce your rent. However, before commencing the process of securing members, you should ensure that you have consent from your landlord. Read through your lease document to clarify if you can sublease or licence any of your office space.

Asking for Permission

Even if the lease permits subletting or licensing, doing so will likely require consent from the landlord. If you are entering into a lease with the intention of subletting or licensing some of the space, then it is important that you request that the lease contain a provision stating that the landlord cannot unreasonably withhold consent in relation to subleasing agreements.

If you have already signed the lease, then you will need to have a conversation with the landlord about what you intend to do.

Sublease or Sub License?

Subletting involves the tenant exclusively leasing part of their rented space to a new tenant. As the original tenant, you become the head tenant, and are still responsible under the original lease to pay rent and communicate with the landlord. The new tenant, namely the subtenant, will owe their obligations to you as the original tenant.

Licensing works differently. While you remain the head tenant, you will not offer exclusive space to the incoming tenant. This is the case in a coworking situation, where you share facilities such as the:

  • kitchen;
  • meeting rooms; and
  • reception desk.

In a licensing situation, you will need to offer your new those using the coworking space a licence agreement.

Considerations for Tenants

Whilst a licence is usually shorter and more flexible than a lease, you will still want to ensure that you draw in good coworkers. Considering the following questions can help you ascertain whether the coworker will be the right fit:

  1. will they be able to afford to pay for the desks they are using?;
  2. will they use the space for what is allowed under your lease?; and
  3. do you have a licence agreement in place with them?
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Key Takeaways

Turning unused office space into a coworking space is a great way to make use of under-utilised space. Whether you are a landlord or tenant, you should always ensure that the building or your lease permits licensing the space for coworking purposes. Once you have the required consent, it is important to have a coworking space licence agreement in place between you and your members.

If you have any questions, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

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