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Industrial Coworking: A Potential Option for Inventory Disruptions
Rya Hazelwood

Industrial Coworking: A Potential Option for Inventory Disruptions

By John Salustri

Here’s a little irony for you: Coworking, which has been a tenant’s option in the office market for about four decades now, has gained serious post-pandemic steam as office tenants continue to reevaluate (and often cut back) their office requirements. And yet, coworking in the industrial sector is gaining steam specifically for the opposite reason: There’s too much space demand.

Now for some disclosure. The industrial coworking (or co-warehousing or shared space) market is embryonic. As such, growth statistics are hard to come by. In fact, a good handful of IAMC members contacted for this article hadn’t heard of the trend, and if they had, they hadn’t seen it in local action.  

Nevertheless, “I don’t think the trend will slow down any time soon or that it’s seen its maximum capability yet,” says Dallas-based Ruben Ramirez, CBRE’s managing director and head of Industrial Logistics Occupier Services for the Americas. Much like its office counterpart, co-warehousing gained momentum during the pandemic and the resultant run-up in inventory needs. Still, by comparison, “It’s fairly young.” At the very least, he adds, co-warehousing will “have an ongoing place in the market.”

Not surprisingly, providers of temporary industrial space agree, and they do so with even greater enthusiasm. Shared space provider Optix, quoting Shedpoint GM Jesse Brown, points out that: “COVID accelerated the move online that was already happening...whether it was brick-and-mortar businesses doing it to survive or people who lost their jobs and opened up an Etsy shop. This shift online and people's growing desire to buy local will drive co-warehousing growth to new heights over the coming years.”

https://www.optixapp.com/blog/what-is-co-warehousing/

IAMC member Brad Wright, CEO of Chunker, has also seen firsthand the growing need for space on the fly. “When we started Chunker six years ago,” he says, “industrial coworking was in the shadows.” Clearly, that’s changed, and the Salt Lake City-based Wright says his firm grew 800% last year alone.

Defining Terms

Chunker, Optix, Saltbox, Shedpoint. These are just some of the names that seekers of short-term warehousing need to know. And while models may differ–Chunker focuses more on large corporates while Saltbox caters to startups–the purpose is essentially the same: locating and securing available warehousing for short-term immediate need. 

That need could be caused by “some sort of temporary disruption,” says Wright, “a seasonality issue or an inventory overflow.” To accommodate such disruptions, Chunker will search its network for “a tenant or owner that happens to have, say, 40,000 square feet at the moment.” 

And yes, despite the much-publicized tightness of the warehousing market, space is always available. “When you see statistics reporting a 2% vacancy,” he says, “it’s always from the landlord’s perspective.” But even though a building could be fully leased, conceivably it might not be occupied at all–or only partially so. Wright estimates that at any one time, there’s at least 20% of the national warehousing inventory that’s sitting idle. 

Those bits and pieces of empty space can add up. In fact, Chunker lays claim to “about 100 million square feet in our inventory right now.”

Much like co-warehousing’s office analog, agreements for space in the model are not leases or subleases. Rather, space agreements are typically for a specified time that can extend only for the duration of the disruption, for a month or two, maybe more. Ramirez even reports that he’s seen more office-like membership agreements, where space users can “go anywhere and take up space that they need.”

In the Chunker model, those agreements are made directly with the owner or the long-term tenant. Premiums for the use of equipment, dock space and, when needed, labor, are negotiated separately.

“There’s almost always a premium involved,” says Wright, “But it’s not required. The person that controls the space can price it at whatever level they want. It’s their space.” Counter to the trend, that flexibility includes below-market pricing. “There will still be way more money in their pockets than if they did nothing.”

In addition to a corral of repeat customers, on both the user and the holder side, there’s a team of agents on board to seek out available space around the country, as well as a robust national network of brokers. 

“Brokers love the model because they hate doing short term deals,” says Wright. “And they hate them for all the right reasons. They don’t make much money off short-term deals and it’s hard to know the granular nature of a tenant’s business,” with its ebb and flow of spaces. But through a coworking provider, they can source a deal, “and they get their fee.”

One way or the other, “We’re pretty good at finding space,” he says, “especially if we have a little extra time. Tomorrow is harder than two weeks from now.”

Making it easier, of course, is technology. In fact, Wright doesn’t label his firm as a space provider. “We’re a tech company primarily. Our technology makes the coordination of these services easier, and that’s what drives our growth.” 

Of Goose and Gander

The co-warehousing trend clearly is a win-win. The owner or prime occupier turns unused space into an income generator, while the needy tenant finds a short-term remedy to their above-mentioned inventory disruptions.

But that’s not the only need being addressed by this emerging space option. Ramirez sees the co-warehousing trend also as a terrific way to test new markets. “With coworking, you can test a location in the short term,” he says. Co-warehousing allows expanding firms the flexibility to prove locational theories.

The May Site Selection IAMC Insider article discusses ... discusses the importance of researching not only the available space in a market, but also that locale’s ability to support the operation with labor. Ramirez points to co-warehousing as one way to accomplish that. 

As we saw with the Saltbox model, Ramirez sees the option as a perfect testing ground for startups, “digitally native brands, garage incubators that have seen substantial growth, can find space here as a proof point.”

Will co-warehousing continue to grow? “Maybe not quite at the pandemic rate,” says Wright, frankly. But then, there are always the inevitable surprises to rely on. “The more disruptions that occur in the market, the more it helps the trend.”  

Prophetically, he concludes on a point we’ve all learned over the past three years: “Nobody really knows when the next disruption will crop up.”

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