Barry Greenfield 0:00
So there are a significant portion of the population who really are starting to get used to working from home. But there’s a much larger percent of the population who don’t have that luxury of even having a room in their house that they can use to have a conference call to make calls from to do a zoom call, you know, what I what you and I would call a quiet space. You know, the average American doesn’t live in a 3000 square foot home or larger. They live in an apartment or a smaller boat, and you’re sharing that with other people. And those are the people who need to and they want to run a business and they’re working 12 hours a day and they need to find a place that they can be really productive. And that’s away from home.
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J Darrin Gross 0:55
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today my guest is Barry Greenfield. Barry Greenfields local works since 2011, has a new take on co working spaces, which means a win win for those with empty offices and leases on their hands, or for small businesses leaving big leases, or for empty law firms. And in just a minute, we’re gonna speak with Barry about local works and how that works.
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Barry Greenfield 2:21
Thanks so much, Darrin for having us.
J Darrin Gross 2:24
I’m looking forward to our conversation today. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.
Barry Greenfield 2:33
Sure, so I’ve I’ve got a broker’s license here in Massachusetts. And I dabble a little bit in real estate on the commercial side, but quite frankly, got involved in the whole co working shared office space concept as a result of having a small software company about 10 years ago. And I needed to get out of the house because I had to hire a couple of employees. And I was looking for a way to defray costs and ended up bringing in a bunch of other associates and friends to share the office space with us. And that kind of morphed into a couple of locations. And then basically in 2019, we struck a partnership with a very large commercial real estate office company that has a very large portfolio in in the Boston area called Cummings properties, and they had a mezzanine space that they just weren’t able to rent. And so they brought us in to fill it up for them with individual office renters, until we essentially created a shared office space for them. And we partner on it and we share the revenue. And so once we got that up and going and saw the success from that, we looked to expand on the concept and then COVID and COVID actually became a boon for our business because so many commercial real estate office properties started seeing vacancies where they hadn’t for a solid 10 years and the market was very strong. And so we just started approaching people with a new concept where we said Listen, you can either hire us to run a shared office space business for you in your space or we can do it as a revenue share. And now we’ve got 22 locations going on 30 and we’re in five states and you know, private care property owners are getting more comfortable with the concept of saying hey, I don’t have to sit there with making space. These guys will fill it up for me. And it’s a win win we can start bringing in revenue within 30 days.
J Darrin Gross 4:33
I love it. Now the whole concept I am so glad you mentioned COVID and its effect because I think that you know this this shared workspace or the you know the the space between work and home or just some somewhere out there for small business, big business, whatever it is a concept that I feel like was kind of like really on a growth. pattern factory cameras. What was that there was a big company that went public and all that. We work. Yeah. And kind of the the rise? And I don’t know, are they still in business? It seems like they ran on some rough times I’m really kept up with them. But
Barry Greenfield 5:15
yeah, they’re acquired out of bankruptcy by a couple of large brokerage firms and some venture capital. And they’re actually doing very well now, because they’ve scaled back the operation and really, you know, focused on running business from a bottom line perspective versus a brand perspective. So, yeah, they took a pretty big hit, and they they weren’t really necessarily running the business properly. And now they’ve got it in line. And there’s a ton of companies out there now that are doing it at a very high level industrious is another one knotel, which also went through bankruptcy. And, you know, because they’d all signed these long term leases that, you know, quite high rates that that once COVID hit, they got wiped out. You know, for us, we market to a different audience. So the larger brand name, co working companies tend to focus on the enterprise clients, the large fortune 500 companies at the top of the pyramid, which is great, you know, and that’s it’s sexy, and that everybody wants to be. But there’s an enormous amount of Business at the bottom of the pyramid in the middle of a pyramid, which are primarily individuals and small businesses and entrepreneurs, who typically are find commercial real estate unaccessible, for a couple of reasons. Number one, they don’t have the financial wherewithal to sign a seven year lease, and come up with the pre payments and the, you know, the cost that’s involved with that. And they also can’t make that kind of commitment. These are people who are maybe working a second job. Or maybe they have a full time job. And this is a new startup for him. And so there’s a couple of interesting trends going on at COVID. Also accelerated, which is this whole what I call the SC model, where people have really started to dive into starting their own craft businesses, and just businesses in general and homecare nursing is I can’t tell you how many tenants or what we call members rent space from us to run their homecare, nursing headquarters. accountants, lawyers, you know, individual lawyers, people have left large firms and started their own practices, CPA accountants who left large firms and now run their own CPA practice. It’s all over the map. But what you have is a lot of individuals, a lot of women, and a lot of minorities, who previously were kind of closed out of the care office opportunity, and they come in through us on a monthly rental. And they stay for a long time, there’s not a lot of churn, and they are so excited to have the opportunity to go to work in a productive, clean, quiet office, dedicated private office that you know, includes Internet, and coffee and water and everything they need. It’s, they’re very, it’s a satisfying business for us, because we’re helping a lot of people who really need office space, and are excited that they’re getting the opportunity to get into a Class A or B or even a seat belt.
J Darrin Gross 7:54
Yeah, no, it is interesting, just the the COVID effect on you know, real estate, specifically the office real estate, and then also just that kind of the notion of everybody or I shouldn’t say everybody, but there’s this kind of a sense of like, well, there’s people work from home, well, you got dogs bark in the background, you got kids, you got noise, oh, I mean, there you go for on cue, the, the, just all of the, the the home environment, noise that can create a, you know, a challenge for the workspace kind of thing. And I know myself, I forever have always gone to the office. Except for you know, since COVID, I’ve been kind of more of a remote worker, but but there’s still something about the workspace and just the ability to get in to a space and in you know, actually be more focused and, you know, be able to leave that space as opposed to be in the 24 seven kind of thing.
Barry Greenfield 8:53
Well, you bring up a great point. So there are a significant portion of the population who really are starting to get used to working from home. But there’s a much larger percent of the population who don’t have that luxury of even having a room in their house that they can use to have a conference call to make calls from to do a zoom call. You know, what I what you and I would call a quiet space. You know, the average American doesn’t live in a 3000 square foot home or larger, they live in an apartment or a smaller abode. And you’re sharing that with other people. And those are the people who need to and they want to run a business and they’re working 12 hours a day and they need to find a place that they can be really productive and that’s away from home. So we you know, we see a you know, there’s a couple of trends going on there. We see a lot of the most of our tent most of our what we call members are 30 to 60 years old, and tend to live in the suburbs. That’s where most of our locations are, although we’re starting to get opportunities in the urban core areas. But we’re also seeing is you know, the 30 and under set, they’re excited to go back to work in the downtown areas. Single people who live you know, live in an apartment they want to get out and they want to get back into the office but people People live in the suburbs who were commuting into downtown areas an hour each way or 45 minutes each way, are now saying, Listen, I’m just as productive at home. But I may not stay at home, but I want to have an office much closer to my house. And so you’re seeing again, I keep using this word acceleration. But you know, Regis has been around for since the 80s. And they’ve been doing these workspaces, although they’ve couple 1000 around the world. So and then, you know, we were co working kind of was adopted as more of an open space type of model where people come in and share desk, co working is kind of dried up during COVID. Because most people don’t want to be sitting next to someone else in an open space. We primarily market private offices, which are very, very much in demand. And we think that’ll probably continue for quite a while.
J Darrin Gross 10:50
So, the, me you’ve been doing this for quite a while I was since 2000, levels, what I read there, when, tell me how that your model is changed from when you started tall to when the COVID the COVID effect.
Barry Greenfield 11:07
Yeah, so you know, when we, when we launched our first location back in 2011, that was primarily just a big room with a lot of desks and people that come in and random desk for a couple $100. And then we opened up one more, and really, we’re just doing co working. And when we entered into that partnership in 2019, we really moved our model away from we no longer lease space, local works no longer interest in total lease, what we do is the property owner provides the space and then we run the business. So it’s a true partnership. And then at the end of each month, we cut a check based on the gross revenue to the property owner. And it’s really a hands off operation for the property owner because most care office property owners want to deal with one tenant per suite, they don’t want to deal with 20, or 30, or 40, or 50, or 60, what we call members, and all the customer support that comes with that all the amenities that come with that. So we’re an end to end solution that they can bring in, essentially hire to run a business for them in that empty vacant suite, whether it’s 5000, or 50,000, square feet of wish, there’s a lot on the market right now. And with sublets, and even new construction, there’s going to be even more more space coming on the market. So that’s kind of how we’ve evolved the model away from leasing space on our own, which tends to be higher risk. And now just partnering with the property owners who have the vacant space
J Darrin Gross 12:32
makes a lot of sense. And you said that the the property owners have been pretty receptive to this.
Barry Greenfield 12:38
So it first you know, it’s a relatively new concept working under a management agreement, where they bring us in, you know, they’re traditionally used to people coming in signing a long term lease, and, you know, paying each month and then that’s it. So it is early in COVID, when we first started talking to people and I was driving all around New England and flying to DC and Chicago to talk to property owners, there was a lot of hesitancy also because people didn’t know how long COVID was gonna go on for. So they’re like, well, we’ll wait it out. And you know, we’re confident the markets gonna come back to where it was pre COVID, which, you know, occupancy rates were never higher, you know, the quarter real estate market was grooving. But as COVID began to go on, and people started to sink in, and maybe things even if 10% of the market didn’t come back, that’s a lot of vacant space. So, you know, we started getting calls returned, and now we actually get inbound calls from property owners saying, Hey, listen, you know, we heard about you, or we read about you, here’s a floor plan Woody, you know, can you put mock up a pro forma for us? And let us know what you think you could do for us on, you know, in the first year? And that’s where a lot of the conversations go. And that’s typically the first step.
J Darrin Gross 13:46
So let me ask you, when you’re looking at a potential property, what are some of the considerations that you guys look at? for, you know, for determining performance or minister too small of a market or too large? You know, what are some of the things that you’re looking at?
Barry Greenfield 14:04
Yeah, no, it’s a great question. So there’s a lot of factors involved. But pretty much any building as long as they can, you know, as long as there’s 15, to 20 private offices in the space, because again, we’re not right now focusing on the open desking, which a lot of people call hot desking. And what we call co working. We are the folks that we market to and that we find who want to rent space, they all want a private dedicated office. So if there’s 15 offices and 2000 square feet, the less open space there is, the higher the gross rate, we’re going to be able to return versus a 10,000 square foot space that is 20 offices, half of which is open space, the returns not going to look as good because we can’t really monetize that open space as well. So that’s one factor, the density of private offices. You know, is is there is there parking on site. Is it accessible to highways is there natural light coming into the perimeter office? Is what kind of shape the space is in. So we focus on. And I think this is important for the property owners out there to hear, we don’t ask for any tenant improvement, we’re, you know, we take second generation space, that’s heavily office, so someone else has already put the money in the carpet might be a couple years old, you know, we asked for the carpets to get cleaned. And if there’s any paint touch up, and maybe some ceiling tiles that are stained, to be replaced, and then we’re off and running. And that’s really it, we don’t, we’re not looking for you to spend a couple $100,000 and redo the whole space, because we recognize we’re not signing a long term lease. So we’re trying to, we’re trying to reduce the amount of risk on the property owners and to the point where they literally don’t have to invest anything. And within 30 days, we’re going to start showing them revenue. And that’s probably the biggest differentiator between us and anyone else who’s doing anything even close to similar to what we’re doing. Just to give you an idea, you know, if a property owner wanted to open their own shared office space, they could go out and franchise, they could buy a franchise for anywhere from a half a million to a million dollars from a company called venture x, and then invest another million to a million and a half to fit out the space. And so probably take six years, six months, six to 12 months, and a huge investment, or they can work with local works and be up and running in 30 days for no investment at all. So what we do is, regardless of the space, whether it’s an A building a C, Class A Class B, Class C, will price it accordingly. And we’re very transparent with the people that we market to and you know, we we do a ton of online advertising to find the what we call them members to come in and rent space, and we price it accordingly. And we tell the people listen, this is a classy building, it’s going to be clean, it’s going to be quiet, you’re going to be productive. But this is not the Ritz Carlton, it’s not the four seasons. And they love that they’re, you know, they’re they, as long as the value is there, they’re going to be happy and they’re going to stay
J Darrin Gross 16:53
well on I think another thing that you mentioned, in just the proximity, I’m assuming a lot of the the proximity is something close to where they live or something as opposed to the hour long commute to, you know, an office place kind of thing. That would be a, I would think that would be a big primary driver, because one of the things I’ve recognized with COVID is how little I drive compared to what I used to do. Is it is that one of the things when you’re when you’re identifying a property, they do look at the the RADIUS server or kind of the concentration of a man, I’m trying to figure out how you guys to determine the, the the size of the opportunity, cuz I know you mentioned that kind of space, but just what about the density of the population around?
Barry Greenfield 17:36
Absolutely. So right now, the areas that we focus on are primarily the Boston area, the DC area in Chicago, in the Chicago suburbs. And so you’ve got, you know, heavy population, so we’re looking for as high traffic density. So where people were don’t want to deal with traffic high, you know, dense amount of office buildings, maybe even where there’s been overbuilding in the last 10 years, which is pretty much everywhere. And the people we draw tend to live within five to five, no more than 10 miles away from the office space. So as long as there’s a decent amount of population size, we look for, you know, also not always suburban, but x urban areas that are further out where there’s been a ton of development. And so those people usually have the longest commutes. So as a result, they’re sitting in traffic the longest. So the likelihood that they’re going to they’re going to find they’re going to want to find a space closer to home is pretty high. And so we you know, we’ve, we’ve had one location out of the 23 that we’ve opened that did not work out, and we just you know, it was not for whatever reason was not the right location, but other than that, we typically can fill up a space within four to six months to about 90% occupancy.
J Darrin Gross 18:46
That’s impressive. So, in the, I would think like you mentioned, the landlords would I mean, as a warm up to it, and recognize that they’re gonna have one, you know, one year the the the tenant that they’re dealing with, as far as the I mean, the the revenue stream as opposed to have to collect separate checks from everybody you’re doing, you’re facilitating that. And just to I’m in a shared or you’ve partnered with them, I think that would be a pretty well received thing once they get past the traditional model of long term leases, and, and all that kind of thing. So what is the most common space requirement that you’re finding as far as the your end user member? What are they looking for?
Barry Greenfield 19:40
So we, they like the fact that we provide a desk in a chair. So it’s furnished, although a lot of people I’d say a third of the people bringing their own furniture, we allow them to what we call nest, meaning they can hang wall art. They can even paint the office if they want, because when they tend to nest, they’re going to stay longer. So even though it’s a month a month rental with a 30 day out, the average person stays 80 to 24 months. There, you know, there are some people come in and say right up front, I want you not three months, right, I only need an office for six months. But, you know, in addition to the individuals who rent from us, we have a lot of small businesses who said, You know what, I just downsize 5000 square feet. And we need three offices, and we’re going to make this our home for a long time to come. And I’ve got half my employees who now want to work from home, and I’ve got half that want to work for an office, and we’re looking for a location or looking for two locations. I mean, we feel probably 10 to 15 phone calls a day, in addition to all the email leads that we get in and across the board. It’s it’s one or one or two of those things, I’m either starting up a new business, or I’m downsizing the space from an existing business. And it’s fascinating, it’s, it’s a real good glimpse into what I would call the new economy. And it’s very encouraging. From the standpoint of if I was an economist, I’d feel really good about the future of this country, just based on the people we talked to, and how important they are to start their own business to be their own boss. And the excitement that they have, you know, we’ve got some people who make candles in the office, we’ve got other people who do physical therapy, do you know, mental therapy? You know, it’s really it’s a wide swath of entrepreneurs and small businesses, and they’re all playing a huge role in the growth of this country. And it’s, it’s, it’s, it’s really encouraging.
J Darrin Gross 21:22
Now, I was gonna ask him, Do you ever get any leads from, you know, you mentioned the guy that’s downsizing, he’s got 20,000 square feet. Now, he only needs you know, a few Pew doors or whatever? Does that ever turn into an opportunity for you to approach the landlord where they’re leaving from as a, have you ever considered local works, we,
Barry Greenfield 21:44
it’s a good idea, you know, it’s fun. We haven’t done that. But you just maybe think that what we also have done is, we will get people who call us up and say, I want to take your entire space. So that’s happened a couple times, which obviously for the landlord is very exciting, because we’ve just, you know, basically rented out their entire, you know, 8000 10,000 square foot space. So in that sense, sometimes we act as a broker as well. And or six months into a month, a month term. Someone says, you know, what, we need to add six people, and I put them in touch with the landlord, and the landlord has a suite of 2500 square feet, that they now rent to them on a long term lease. So we act as a farm system to a certain extent as well, it doesn’t always happen. But I’d say, you know, on at least once a year and every property something like that comes up.
J Darrin Gross 22:32
Yeah, no, and then just kind of good. Reinforce the partnership there. The landlord’s getting other space filled. Now you’ve got more space to, to lease out there. So you mentioned you’re, you’re in five markets right now. Is that right?
Barry Greenfield 22:48
Yeah. So we’re in five states we’re in? We’re in Illinois, Maryland, Virginia, Massachusetts, in New Hampshire.
J Darrin Gross 22:55
Gotcha. And you mentioned currently 22 going to 30 locations? Are you? Are you taking the model? further? I mean, where’s your next growth? Or where do you expect the you’ll be here near.
Barry Greenfield 23:10
So our current plan is to try and get to between 15 and 20 locations in each market, and then expand from there. We’re also opportunistic. So you know, we’ve, on one hand, we’ll look at just about any opportunity. On the other hand, you know, we had a chance to take over a large building, downtown Portland, Oregon, and it was just too far away from our current core competencies in terms of personnel to handle something like that right now. But DC is a very strong market force all around the DC area. So we’re adding, we’re adding five new properties down there. So that’ll give us 11 in DC, and Chicago will be adding over the next six months, probably three or four more. And then, you know, basically, the way we look at it is, you know, any major metropolitan area, like with significant traffic issues, we think that we think a local works. Location can exist in just about any suburb, it doesn’t really, you know, anything that’s got at least, you know, eight to 10,000 people or more in terms of population, there’s an opportunity to fill a space there. There’s no question based on what we’ve seen over the last year.
J Darrin Gross 24:15
Now, I love the name. I think that’s that’s kind of a, you know, specific, it says what you guys do local work. I mean, that’s good. So, a very if we could like to shift gears here for a second day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with risk. And there’s three strategies that we typically look at, we first look to see if we can avoid the risk. If we can’t avoid it, then we look to see if there’s a way to minimize the risk. And if we can either avoid or minimize a risk then then we look to see if there’s a way to transfer the risk. And that’s what an insurance policy is. And as such, I like to ask My guest, if they can look at their own situation, can be clients investors, the market, you know, however you would like to frame the question and answer regarding the biggest risk. for clarification, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you very Greenfield, what is the biggest
Barry Greenfield 25:27
for local works, the biggest risk we have going forward is not growing quickly enough, there’s a huge market out there that we’ve already proven, exists and can be profitable. And in order to scale at the pace, we need to scale add, probably require some form of investment, you know, we’re adding, we’re trying to add three or four locations every two months. But in reality, to get to where we want to be in terms of a real hyper growth company, we probably need to be adding five or six locations a month. And part of the problem is, we spend so much time making sure each location is successful. And that requires a lot of manpower and a lot of focus. So we’ve turned down opportunities that we probably should be taken. And if local works is going to grow to compete with these other large companies that are in the press all the time. We need to start taking not turning away that business and find a way to fund a larger team that can handle you know, growing to 250 to 500 locations. So it’s nicely a risk to the company failing, it’s just a risk to the company being even more successful.
J Darrin Gross 26:40
And interesting, the you know, what the risk is? And like, you know, your your situation there, though, it seems like it’s a fairly common one right now. It’s just finding people. I mean, I continually hear that across all industries right now. Is that the challenge of finding, finding people? Do you have any thoughts on that? I mean, obviously mentioned capital and stuff for, for bringing people on, but are you able to find the people you need.
Barry Greenfield 27:08
So we’ve been fortunate that, you know, we’ve got a small team that works really hard, but they do a great job. And because we run most of our operations remotely, even though we have part time people feed what we call feed on the ground in each major metropolitan area to pop in at least once a week to each location, we run, you know, customer support and marketing and sales remotely. So that makes it easier to find people. But the the for us, the bigger we spend a lot of money on marketing each space to fill it up as quickly as possible. And so we tend to use the cash flow from the business to reinvest it into each location. And that’s really the the only kind of Governor right now on our business is the the capital that comes in
J Darrin Gross 27:55
traffic pattern. Well, I wish you well with with your growth and and, you know, making an app in there because it’s I love the love the concept. And it seems like it’s a win win for everybody involved there. Sounds great.
Barry Greenfield 28:10
Thank you very much. We appreciate the opportunity. You know, we feel like we’re helping both property owners and the folks who are looking for office space, so it’s it makes it a fun business.
J Darrin Gross 28:19
No, absolutely. Barry, Where can the listeners go if they’d like to learn more connect with you?
Barry Greenfield 28:24
Sure. So my email is Barry at local works.us. Or they can call they can reach us Our phone number is 202-210-9556.
J Darrin Gross 28:43
Got it? Barry, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed our talk, learned a lot. And hope we can do it again soon.
Barry Greenfield 28:53
Thank you very much Darrin.
J Darrin Gross 28:54
All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks, CRE PN Radio.
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