Unlike WeWork, which generally rents its locations from building owners, Novel owns its own buildings.But the company still faces similar challenges as WeWork, most notably the danger that tenants could abandon it relatively easily in an economic downturn.SAN JOSE, Calif. — Bill Bennett isn't exactly bounding or shouting or grinning gleefully. But even in his understated way, it's pretty clear the CEO of Novel Coworking is excited to play tour guide on this early December day.
And that actually understates the bet Bennett and Novel are making. Typically in the coworking industry, a company such as WeWork turns a few floors of a building owned by someone else into flexible office space. But Novel itself owns the buildings it operates out of and converts them entirely into coworking spaces.
Novel rival WeWork was forced to abandon its planned public offering after investors pushed back against its massive losses and transactions involving former CEO Adam Neumann.That kind of office space has proven to be increasingly popular. Real estate services firm CBRE estimates that by the end of this year there will be 77 million square feet of flexible office space in the US, up 23% from last year.
Novel purchases its buildings with partners, so it doesn't own them solely, he said. It's raised some $650 million thus far by selling equity. Although it's raised additional funds through debt, its debt levels are low, Bennett said. As a private company, Novel doesn't publicly disclose its financials.
Novel's focus on owning its buildings and paying a reasonable price for them gives it a big advantage, Bennett said. It can charge less than competitors. Novel customers pay about 30% less than they would for a comparable space from WeWork or other rivals, said Tom Smith, a cofounder of Truss, an online commercial real-estate marketplace.
Those companies are generally spending their own money rather than burning through venture capital, so they tend to be much more price conscious, Bennett said. But they're also the kinds of businesses that tend to be around regardless of the economic cycle.
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