In this slowly evolving post-recession economic climate, increasing numbers of cash-starved homeowners pool resources with others who need shelter by cohabitating in residential properties. Now the trend of cohabitation has spread from residential units to commercial properties, as California’s income property owners find innovative ways to stave off the 18% vacancy rate throughout the state’s office buildings. For a minimal rental payment, start-up businesses can share office space with others who only need a desk or two. In the process, landlords can fill vacant space and generate income.

“Co-working” allows multiple one- or two-person businesses to group together in a single office and have a professional space to work, rather than independently conducting business in their own garages. ”Co-working” arrangements cost a fraction of the price of a lease and generally offer more flexible lease terms, making them ideal for fledgling start-ups.

San Francisco has a thriving co-working community, and San Diego is following suit. The innovative arrangement is a relief for commercial property owners who are struggling to fill their buildings and pay their bills.

first tuesday take: Agents and brokers representing commercial landlords can alert them to this rerun of what took place in prior recessions — particularly in the early 1980s. Sharing space or cubicles, furnished or unfurnished, in a larger office facility is what an association of brokers does, and has always done.  Underemployed attorneys and providers of other consumer services do this as well when all they need is an office front to best conduct their ventures.

The individual packaging all this fractionalized space and marketing it to others as a place to meet clients and conduct business simply sandwiches himself in between the landlord and the occupiers of the desks or mini-office spaces to pick up the rent differential they have negotiated.  Thus, a master lease and subleasing of sorts takes place – depending on who has exclusive access to parts of the space.

Landlords of vacant office space and aggressive property managers looking for other management opportunities in real estate who provide this option will gain experience with Generation Y tenants — a practice that will serve them well in the new real estate paradigm in which frugality, due to scarce job opportunities, has created fertile ground for innovation to flourish. [For more information regarding the real estate paradigm shift, see the May 2010 first tuesday article, Looking through the window towards recovery: a real estate paradigm shift — Part I and Part II; for more information regarding Generation Y and the real estate potential of start-ups, see the October 2010 first tuesday article, The demographics forging California’s real estate market: a study of forthcoming trends and opportunities — Part I and Part II.]

Re: “To save cash, business owners opt to share offices” from Sign on San Diego