John Wallace’s Post

CHICAGO FRIENDS, Please join me next Thursday, 2/1 from 3-6pm CST for all of our official opening festivities of the new Workbox Loop location (@ 125 S Clark - above Revival Food Hall). RSVP at the link below and see you all next week!

Another big announcement for Workbox Company! Excited to be adding a fifth location in the literal heart of Chicago. The Loop was our last major sub market void in our home market, but an important addition to the portfolio because we believe strongly that a healthy downtown market is essential to the continued recovery of our city’s economy. Well done, team!!

Lots of talk about WeWork, so figured it was worth sharing our thoughts on what the recent bankruptcy headline means to the office sector. Workbox Company was launched in 2019 and prior to that I spent nearly 20 years on the real estate investment side of the business. To anyone in commercial real estate, this bankruptcy has been a discussion point for the better part of five years. TV dramas aside, the two biggest factors of last week’s Chapter 11 filing were 1) a misalignment in assets (shorter-term revenue) and liabilities (long-term leases) and 2) losing sight of their original customer base by taking on too much sqftage and evolving into a generic lessor of space. The coworking sector is maturing and the operational merit of the industry needs to be decoupled from whatever headlines are coming out of this recent filing. In fact, the flex office sector stands to play an integral role in the recovery of the office sector in this new era of work. My high-level thoughts are below: ·     WeWork assets will largely be transitioned to other operators. WeWork will resize its portfolio over the next 120 days and many of its asset will be back in the hands of landlords, but still the most capital efficient alternative for landlords is to avoid repurposing these assets to another use. ·     Flex office is significantly outperforming all other real asset segments (high double-digit revenue growth). Growth is being driven by an acceleration of new company formation, geographic fragmentation of employees, and the adoption of hybrid work across nearly every single industry. ·     Landlords need to partner with operators to be successful in flex. Coworking is an operating business NOT a leasing business. To be successful requires brand awareness, dynamic pricing strategies, high touch services, and limited reliance on third party brokers who are not incentivized to source smaller deals. ·     The biggest hurdle to shared economic arrangements is temporary. Variable rate income has been valued and lent against for decades in the hotel sector. Significant arbitrage will exist if these cash flows continue to be mispriced in coworking. ·     One size DOES NOT fit all. The best coworking operators will drive outsized value to a homogeneous customer population. Landlords need to consider best operators for their specific asset, which also parallels the hotel sector that does a much better job segmenting customers. We think it's important to separate any individual failure from an industry that is going to play a major role in the office recovery.  Flexibility is the future of work and with proper aligment we can drive all the good things we want to see happen in the office sector – Higher utilization, engagement, activation, and NOI. There is a world of opportunities being created by today's displacement and those leading the change stand to benefit the most. We look forward to being a trusted partner in this next phase of evolution for coworking.

Excited to add another REITster to the Workbox Company team! Timothy Doman brings over 30 years of real estate ownership experience to our executive team and an immense amount of commercial knowledge all the way up to running large public REITs. How we work has changed drastically over the last few years and Tim will be pivotal in ensuring that we as an organization are considering all of the value opportunities we can provide to our landlord partners. In this role, Tim will be leading the charge on our national real estate expansion plans as the EVP, Head of Real Estate. Welcome, Tim!

Looking forward to presenting on flex at BOMA International this week. Finalizing my meeting schedule, but excited to connect with as many owners as time allows so just ping me directly if you'd like to connect in-person while we are all in San Diego.

Expanding our local resource offerings for members to more and more cities outside Chicago. Excited to be a sponsor of Twin City Startup Week and to see our very own Phil Leslie, Managing Partner of Workbox Venture moderate a panel on the early stage funding environment in 2023. Swing by our space if you’re in Minneapolis on Sept 18th. Registration below.