Big Business: how bigger can ruin a good thing.

Why is it that large pools of capital can see a good thing and overwhelm it, throttling the nuance that made the good thing good?

Linda, Rob and I are in the middle of deciding how we are going to house the “business” for the next couple of years.  Our dilemma is finding a way to provide office space for our practice, keeping it affordable while maintaining an attachment to a community.

I went on a riff over the last two days about large capital pools buying out co-work spaces, jacking up rents and costs to the point that they are becoming non-competitive.  We’ve looked at the options and we are arriving at the conclusion that it’s a lot cheaper to rent a traditional office space, furnish it and pay the ancillary costs than it is to stay in a “community” space.  In my opinion “all in” it’s about 30% cheaper.

A couple of months ago Linda observed with some degree of comfort “the floor is getting older”.  It took me a fair amount of time to digest that, only to quip months later that “yeah, that’s because the people we wanted to be around can’t afford to be here.”

There is a truism that in our society that capital is attracted to trends because of their excess profits and opportunity. Co-work spaces are supposed to be all about community and a single “all in” price that makes plugging in easy and convenient.  When that single price becomes prohibitive to the community, the very essence of the community is destroyed.

Having to parse the way I make a living and examine it in minute detail has left me questioning many of the foundations that it was built on.  And I increasingly look through issues with the help of my millennial children’s’ eyes.  Those eyes don’t see the world on my continuum, but rather in a completely new way.  And most often, that fresh look is the better one.

I accept that change and the deployment of capital are inevitable in a growing community.  What you give up in human scale and pressure on infrastructure and public services, you gain in a greater vibrancy and diversity.  That doesn’t mean I can’t spot when aspects of that change stops being additive, that it starts to subtract.

At some point in the deployment of capital, prices to consumers rise rapidly so that excess profits can be retained.  Price is a great leveler and as competition continues to raise prices, a point of in-elasticity is reached.  I would suggest to you that the world of co-work spaces is rapidly reaching that point.

As we move towards making an office decision, my dilemma, our dilemma, is figuring out how to remain part of a community that gives us fresh eyes and challenges us to be different.

David Chellew and Linda Odnokon have been life partners and in business together for almost 19 years. During that time, they have mellowed into their respective roles and enjoy working with individual investment clients. Dave is a Portfolio Manager and Linda is an Investment Advisor with iAS and work out of the co-work space Brightlane on King West in downtown Toronto.

 Industrial Alliance Securities Inc. (iAS) is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (iAS) and does not necessarily reflect the opinion of iAS. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. For more information about iAS, please consult the official website at David Chellew can open accounts only in the provinces where he is registered.