EQ Office Says It Believes In The Future Of Coworking, Brings Industrious To Willis Tower
EQ Office, the owner of Willis Tower, signed a management agreement that will eventually give flex space provider Industrious more than 52K SF in the iconic skyscraper.
The move comes as a big question mark hangs over the flexible office market. Workers have become leery of sharing office space, whether in flex spaces or within their own companies, and that has left landlords and coworking firms with a conundrum: How do they bring people back, when so many have been comfortably working from home during the coronavirus pandemic?
EQ Office officials say one answer is to use flex space as an amenity, and having Industrious within Willis gives workers in the building additional options if they need more space as the pandemic stretches into 2021.
"Our latest partnership with Industrious is an example of how we are creating workspace options and choices for our customers to support different work modalities and patterns as we continue to innovate the office space products at Willis Tower," EQ Office Senior Vice President and Portfolio Director David Moore said in a prepared statement.
The approach makes sense, according to MBRE Executive Vice President and Managing Director Andrew Davidson.
"Unlike WeWork's strategy, this is a deal where both participate in the revenue," he told Bisnow. Davidson did not have any role in the transaction.
In return for a break in its rental rate, Industrious will give a portion of its revenue to the owner if the space does well. That was a common arrangement for flex office providers before WeWork started signing traditional leases that left it vulnerable to declines in office demand.
"If Industrious is doing well, the landlord will probably do better than they would if they simply rented it at market rate," Davidson said.
And setting aside 52K SF in Chicago's largest office building doesn't put much on the line for EQ Office.
"It's relatively low-risk, and you've got a lot of upside if having this amenity helps capture some tenants you otherwise wouldn't have," Davidson said.
EQ is currently completing a more than $500M renovation, which includes adding 125K SF of tenant-exclusive amenities; Catalog, a new 300K SF retail, dining and entertainment venue; and a 30K SF outdoor deck and garden. Industrious’ space will open in phases beginning Q1.
"It's likely we will see more of these types of deals in the future," Davidson added.
But he is still uncertain about the shared office sector's long-term viability.
"It's going to have a tough time. There has to be more demand in the office market, and right now, our market is suspended and it probably will be for a while."
