Reworking Office Space: Industry City, Brooklyn Harvard Case Solution & Analysis

Reworking Office Space: Industry City, Brooklyn Case Study Solution

On the basis of above analysis, it could be said that, SOO is an optimal alternative option for Jamestown as it shows the highest aggregate matrices points. Jamestown NPV is positive and the cost of capital is also low it means that the risk associated with this expansion plan is low than other alternatives. Jamestown would target large operators so the operational complexity would be low for Jamestown. The company would earn positive economic benefits but the investors or shareholders might not show interest because of risk. In a nutshell, shared-office operator is an optimal alternative solution for Jamestown.

Note: See Exhibit-1: Summary of quantitative and qualitative matrices.

Benefits and Risks

Flexible co-working and shared office space is creating impact on the office property landscape. The tenants could sign up for short term license agreements rather than 5 or 10 year lease agreements. Tenants provide all-inclusive fees, for conference room, kitchen and snacks, TI allowances and maintenance etc. This business model provides sustainable and predictable business income. Shared office space does not require huge management cost but the control should be sustainable. Sometimes the owner provides the brand name the operator and share the profit in return. Bigger companies mostly tend to bring more profits to the developer. Larger organizations are more attractive because they bring in more tenants, sign long-term lease and generate huge revenues. Premium subscriptions provide mutual benefits to both the customer and the company as the company provides renovated office space, brand partnership and perks like snacks in return of higher prices. Although this business is growing but it could be challenging for landlords with no direct experience. The risk of competition is also high as there are various office shared space businesses exist in the market. At the time of recession this business model can reduce the rental expenses because of insufficient memberships but long-term leases will bring profits.

Sustainable Business Model

The global financial crisis of 2008 has changed the business climate. New economic order has started taking place. In the 21^st century, government policies started shifting significantly and organizations faced many structural and governance changes. A phenomenon of Innovation-driven economies has emerged and shared office space increased growth and innovation both. The market for flexible office space and co-working solutions is growing and creating impact on the office property landscape. The companies does require less management cost but huge control. This business model is efficient and brings profitable economic benefits to the company. A shared office business model offers small to midsize and freelancers flexible environment through short-term lease, mostly monthly or weekly agreements. This option is both, less risky and cheaper for new startups as in this agreement, customers do not have to find the property, finance for improvements and obligate themselves for long-term lease like traditional transactions.  Smaller companies can hedge the risk by paying monthly fee and can cancel their subscription any time. The company’s operating lease obligations are mostly due in coming years which allows company to offer cheaper rents. The company can pass this advantage in the form of competitive pricing to its customers. In short, shared office space is an emerging business and provides benefits to the company and landlords both. It is a sustainable business environment because it provides predictable and stable revenues to the company.

We Work Valuation

Enterprise value to EBITDA multiple is used to perform the multiple valuation analysis of We Work. Forecasted EBITDA is $1130.70 and enterprise value is $1848 million. EBITDA multiple is 1.79 and the net worth of the company is $18 billion. According to the valuation, the enterprise value is higher than $17 billion. The minimum economic value of the company is $18 billion.

Note: See Exhibit-2: We Work Valuation

Co-working Space Layout

The design of the shared office space impacts the productivity of the workers. The environment should be comfortable and creative. The layout of co-working space seems to be affective for diverse group of users as there is enough co-working bar space for the workers to interact with each other, work effectively and come up with innovative ideas. Separate suits are also incorporated for the people who want to focus on their work without any disturbance. There should be one more conference room as diverse group of people work together so there could be more than one conferences or meetings at a time. Co-working space layout should also include the coffee shop and exercise area as well. Refreshments and physical activities provides relaxation to the employees. State of the art facilities and equipment would attract more customers towards co-working business environment.

Appendices

Exhibit-1: Summary of Qualitative and Quantitative Analysis

Exhibit-2: We Work Valuation

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