Co-working office models are changing office financing, and not necessarily by choice. The popularity of co-working and flexible office leasing has forced lenders to develop new underwriting standards for these businesses. In some instances, co-working platforms, and the often household name clientele they attract, has a better credit than many smaller direct-lessees, and that can create a halo effect for office properties with co-working tenants.

“The way that buildings are financed is starting to change. Cap rates on office properties with co-working have a halo effect because that cash flow from a co-working operator is seen as high quality,” John Arenas, chairman and CEO of Serendipity Labs, tells GlobeSt.com. “It is a totally different situation than it was years ago.”

A big part of that is the quality of the brand’s members. Co-working companies like Serendipity Labs aren’t only serving start-ups that can’t get into or afford an office space. They are serving employees and project teams from major corporations. “I think that co-working operators are aggregating better credit than most small leases that a landlord would sign,” says Arenas. “If we have American Express and Netflix at a location, that credit quality is much better than a small law firm tenant than a landlord is going to sign in the building. That is the big picture of what is really shifting.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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