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Breaking Down Knotel- Headquarters as a Service

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icon_Follow_en_US Breaking Down Knotel- Headquarters as a Service

Knotel’s Emergence

Office space design and operational modalities are constantly changing. This is especially so in competitive markets such as New York, London, San Francisco, and Tokyo. Companies are constantly reinventing how their employees should work including lighting, furniture, and layout concepts. But interestingly, over the past decade, changes in the business of office space have emerged with new concepts such as coworking (the WeWork model) and managed leases. More recently many coworking companies such as WeWork, The Yard and Knotel have introduced headquarters as a service offerings.chive-office-pics-3-700x896 Breaking Down Knotel- Headquarters as a Service

Headquarters as a Service

Headquarters as a service is a new phenomenon where a provider such as Knotel leases space from a building owner (currently there are 50+ locations) builds, furnishes, and wires the space, provides basic services including cleaning, maintenance, and management, and subleases or licenses the space to businesses for a flat monthly fee. Knotel will sign short term office leases of as little as three months offering lots of flexibility to growing businesses. Their tenants don’t have to hassle with managing the different service providers such as internet, cleaning, and paper vendors only paying a single bill every month. Additionally, as they grow, their tenants can swap spaces within the Knotel network at any time. For this convenience tenants will pay between $80.00-$99.00/ RSF. Sounds expensive! Let’s look at the numbers to understand whether Knotel is a bargain or an expensive hotel to park your business.

Cost Breakdown

There are several off the grid costs of leasing office space including electricity, cleaning, internet, refreshments, and cleaning supplies that will need to be considered when comparing Knotel and other Headquarters as a Service companies to a traditional lease. Let’s analyze the numbers for  a 5,000 RSF sublease space in Flatiron.

Knotel Office Lease
Rent Included $50.00/ RSF
Electricity Included $2.50/ RSF
Additional Utilities Included $0.25/ RSF
Internet Included $1.25/ RSF
Office Supplies Included $1.00/ RSF
Misc Included $3.00/ RSF
TOTAL $80.00 $58.00

But that’s not necessarily where Knotel excels. One of Knotel’s key selling points is the minimal out of pocket cash required to occupy its space. Knotel boasts a low security deposit of around 3 months for a 1 year lease, 4 months for a 2 year lease, and 5 months for a 3 year lease, and is delivered fully built  including furniture, IT wiring.

Here are the numbers assuming a 2 year lease term on the same 5,000 RSF sublease space:

Knotel Lease
Security Deposit $100,000 (3 months) $125,000 (6 months)
Furniture Included $25,000 (or included in sublease)
IT Included $6,250 (or included in sublease)
Designer Included $6,000 (or included in sublease)
Buildout Included Included
Total $100,000 $162,250
Here Knotel clearly wins with a considerable savings on up front costs.

Subleasing Office Spacemoving_into_a_new_office Breaking Down Knotel- Headquarters as a Service

However some of the answers provided by Knotel are less relevant when considering subleasing space as an alternative. Subleases typically trade at a discount to the market rent, are usually fully furnished and wired, and more often than not are shorter term in nature. Additionally, from our experience, sublandlords often don’t require as much of a security deposit as building owners freeing up more cash. What Knotel does provide is an easy hassle free sign on onboarding experience.

What else?

Becoming a member of Knotel means that you’ll choose a space within their portfolio and which could be a perfect fit or might require some compromises on your part. Some 5,000 RSF tenants need an extra large board room for town halls and investor meetings, some need extra meeting rooms, and some need private offices. With Knotel, unless you’re willing to sign a longer term lease the space is the space. Leasing your own space comes with the ability to fully customize your office space to suit the unique requirements of your business.

Conclusion:

Knotel could be equated to renting a car- it’s a great short term solution requiring little out of pocket with no maintenance costs. However over the long term leasing space from Knotel becomes much more expensive as any savings is overcome by the significant premium in the monthly rent.  Additionally, the out of pocket savings could easily be obtained by finding a built furnished plug and play sublease.

Take a look at some recent built sublease options here. If Knotel seems like a good fit then we’d be glad to show you their options and walk you through the process.

 

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Jack Cohen

Jack Cohen has over 15 years of industry experience developing and implementing real estate strategies for clients in Manhattan and throughout the United States. Prior to founding Spaces Commercial Real Estate, Jack was a Managing Director at Colliers International for 3 years and a Director at Cushman & Wakefield for 9 years. Jack’s forward thinking has engineered some of Manhattan’s most unique and difficult deals including the repositioning and leasing of 636 11th Avenue, a 564,000 RSF warehouse to office conversion, which was awarded real estates highest honor- REBNY’s Henry Hart Rice Most Ingenious Deal of the Year Award. Jack is a graduate of Rutgers University School of Business where he majored in Economics and Business Management. He is a member of the Real Estate Board of New York, the executive committee of American Israel Public Affairs Committee (AIPAC), and the Board of Education of Keter Torah, his childrens’ school. Jack lives on the Jersey Shore with his wife and three children.