Our readers may have seen the recent report in The New York Times pertaining to the sale of Lord & Taylor’s flagship location in Manhattan to a co-working space company called WeWork. This seismic change in the use of “America’s Dress Address” is quite significant. Lord & Taylor realized that its huge location in Manhattan was out of fashion and much more valuable when considered as a real estate asset only, rather than the proceeds generated by mostly clothing sales. WeWork is a company most identifiable with the revolutionary means in which millennials are choosing to work. Many millennials tend to be self-employed, but may prefer to work away from home. They demand temporary and flexible work quarters. WeWork allows such people to select a location for the short or long term at a price to be determined, without a long term commitment. The worker or user has a professional location in which to engage in his occupation.
This post will address this transaction from a commercial leasing perspective. The purchaser will use the Lord & Taylor property as its headquarters, through which it will presumably enter other commercial leasing transactions for other properties, and for shared work quarters in this property. When entering commercial lease transactions for other properties, this author would suggest attempting to obtain the following provisions in such commercial leases.
Commercial leases typically identify the permitted use, such as real estate office, medical office and the like. However, in this case, the tenant will want the use to be as broad as possible. For instance, general office use, including co-working space and ancillary use may be suitable for this tenant. That way, when multiple parties occupy and leave the premises and use the space for varied purposes, it will not be a lease violation. Co-working spaces could be shared by diverse parties such as writers, day traders, salesmen as well as those who want to host conferences and meetings and the like.