OpCos, PropCos, or Both? How Investors Should Think About Flexible Workspace Capital Structures

When an accredited investor tells me they're "interested in coworking," my first follow-up question is always the same:

Do you mean the operating business, the real estate, or both?

Most of the time, they don't know there's a difference. And that's the problem. The flex industry has at least three distinct flexible workspace capital structures operating side by side, and the risk-return profile, the holding period, the diligence questions, and the exit options are all different across them.

Let's walk through the three structures, using four real operators as case studies.

Structure 1: The pure OpCo

In a pure operating company structure, the operator runs the flex business but does not own the underlying real estate. Instead, they sign long-term leases with landlords for each location, build out the interior to their standard, and then sublet the space to members on flexible terms.

The economics: the operator captures the spread between the rent they pay the landlord and the revenue they generate from members. The real estate appreciation (or depreciation) belongs to the landlord. The operator's value is the operating business — brand, member base, systems, location density, and ability to win enterprise deals.

Case Study: Pacific Workplaces.

Pacific Workplaces is a textbook OpCo. 16 locations across the West Coast, 23 years of operating history, profitable through every market cycle including COVID. Every location is leased, not owned. The PAC brand, the member relationships, the staff, and the systems are the asset.

Why this works in 2026: Asset-light operators can sign new leases today at significant discounts to 2019 rents, locking in cost structures their asset-heavy competitors cannot match. Pacific Workplaces' 32% non-desk revenue (Virtual Offices, Meeting Rooms, services) gives the model resilience that pure-desk operators don't have.

Case Study: Industrious.

Industrious — now owned by CBRE — is the larger, enterprise-focused version of the same model. Industrious operates through management agreements with landlords (effectively a revenue-share rather than a fixed lease in many cases), but the structural point is the same: they don't own the real estate. They run the operating business and split the economics with the landlord under a contractual framework.

The CBRE acquisition validated the OpCo model as a strategic asset class — a global brokerage paid serious money for the operating business, the brand, and the enterprise pipeline, not for any real estate underneath.

Structure 2: The hybrid OpCo + PropCo

In a hybrid structure, the same parent organization (or two affiliated entities under common ownership) runs both the operating business AND owns the underlying real estate. The OpCo pays rent to the PropCo under an internal lease, and investors can typically choose to invest in one entity or the other — or both.

The economics: the OpCo captures the operating margin. The PropCo captures the real estate appreciation. The full vertical of value accrues to the parent organization and its investors.

Case Study: Caddo Office Reimagined.

Caddo, based in the Dallas-Fort Worth (DFW) metro, runs a hybrid model that's well-suited to its market. Founded in 2009 by Justin Engler, Dustin Schilling, and Tim Slaughter, the company started by repositioning 1980s-vintage office buildings in the DFW area before rebranding to Caddo Office Reimagined in 2020. Today they operate ten neighborhood office locations across Plano, McKinney, Frisco, Flower Mound, Allen, Richardson, Lakewood, and Prosper.

The Caddo product is private offices with hard walls, lockable doors, 60-day cancellation, and no-term leases — sold to small business owners who want "near home, but not AT home." That product specification works beautifully in their target submarkets because they:

• Bought the buildings at attractive bases in suburbs they knew well
• Operated as landlord-operator hybrids with very strong local market knowledge
• Targeted a specific demographic (suburban small business owner) and built the product around it

Why this works in DFW: Caddo's PropCo basis was set when DFW suburban real estate was undervalued relative to the demographic growth that was about to hit it. The OpCo runs at a higher margin because the "rent" it pays the PropCo is below market — that spread accrues to the parent.

Case Study: Expansive.

Expansive (formerly Novel Coworking) operates the largest hybrid OpCo+PropCo model at scale. Per their materials, Expansive owns more than 40 of its own buildings totaling 3.8M SF nationwide. They are both the property owner and the flex operator, which they explicitly position as a competitive advantage: they can customize space for tenants because they own the underlying asset and don't need a landlord's sign-off.

Expansive also extends the hybrid model with a third leg — they offer management services to third-party landlords looking to activate flex space in their own buildings. So the company operates as a PropCo (40+ owned buildings), an OpCo (the flex operating business), AND a manager-for-hire (white-label flex management for outside landlords).

Structure 3: The pure PropCo

In a pure PropCo structure, the investment is in the underlying real estate, with the flex operator running the business under a separate management or lease agreement. The investor's return is driven primarily by real estate appreciation and the rent the operator pays — not by the operating margin of the flex business itself.

This is the structure underneath things like landlord-operator partnerships — Hines' "The Square" (originally partnered with Industrious), SL Green's Altus Suites at One Vanderbilt, Tishman Speyer's Studio platform, and the various flex partnerships big landlords have launched in the last few years.

Pure PropCo investments in flex space are less common as standalone vehicles for accredited investors. They tend to exist inside larger institutional real estate funds rather than as discrete opportunities.

So which one should you invest in?

This is the question I get most often, and the answer is genuinely "it depends." Here's the framework I'd use:

Invest in the OpCo if...

• You're looking for higher target returns and you're comfortable with operating risk
• You believe the operator has a real edge — operating track record, regional density, brand, systems
• You want exposure to the demand-side tailwind in flex space without taking real estate cycle risk
• You believe we're in an environment where flex operators can sign new leases at favorable terms

Invest in the PropCo if...

• You're looking for more stable, real-estate-style returns
• You want exposure to a specific submarket where you have a view on real estate appreciation
• You prefer asset-backed investing over operating-business investing
• You can underwrite the real estate basis independently of the operator's quality

Invest in the Hybrid OpCo+PropCo if...

• You want both the operating margin AND the real estate appreciation in one investment
• You trust the operator to also be a good real estate underwriter (these are different skills)
• You believe the submarket has tailwinds for both flex demand AND real estate values
• You're comfortable with the concentration risk of having operating and real estate exposure to the same buildings

The mistake investors make most often

The single most common mistake I see accredited investors make in this category is conflating the three structures. "I want to invest in flex space" is not the same thing as "I want to invest in a flex operator" or "I want to invest in real estate that happens to be operated as flex."

The diligence questions are different. The risk factors are different. The hold periods are different. The exit options are different. The target return profiles are different.

An OpCo investment is fundamentally a bet on the operator's ability to execute against a demand backdrop. A PropCo investment is fundamentally a real estate bet with operating exposure layered on top. A hybrid is both at once.

So should you do both?

My honest answer: most sophisticated investors I talk to who are bullish on flex space build a small portfolio that includes both an OpCo investment and a PropCo investment, in different submarkets, with different operators. That gives them exposure to both the operating tailwind and the real estate cycle, with diversification across operators and geographies.

It's also more work — twice the diligence, twice the legal review, twice the K-1s. Whether that's worth it depends on the size of your allocation to the category.

If you're sizing a $100K position, picking one well-underwritten OpCo with a credible operating track record is probably the right move. If you're sizing a $1M+ allocation across multiple managers, the portfolio approach starts to make sense.

Takeaways

• Know what you're buying. OpCo, PropCo, and hybrid are three different products with three different return profiles. Don't underwrite one as if it were another.
• Ask about the basis. For a PropCo or hybrid, the underlying real estate basis is the single most important variable. For an OpCo, it's the operator's existing lease terms and ability to sign new ones at favorable rates.
• Match the structure to the macro view. If you're bullish on flex demand but neutral on office real estate, OpCo is your structure. If you're bullish on both, hybrid is interesting. If you're bullish on real estate but want some operating exposure, PropCo.
• Diligence the operator either way. In all three structures, the operator's quality is the variable that determines whether the investment works. Real estate without a competent operator on top is just empty space.

Pacific Workplaces Fund A is structured as an OpCo investment. If you'd like to understand how Fund A is structured, why we chose the OpCo route for this raise, and how the waterfall is designed to align with how flex space actually performs as an asset class, contact our Chief Growth Officer, Ben Wright at Ben@PacificWorkplaces.com to begin accredited investor verification.

This article is for informational purposes only. It is not investment advice and is not an offer to sell or solicitation to buy any security. Any references to specific companies are illustrative; nothing here should be construed as a recommendation to invest in any of them. Any offering of Pacific Workplaces Fund A will be made only to accredited investors pursuant to a Private Placement Memorandum under Rule 506(c) of Regulation D.

Sources & Further Reading: Alpaca VC ("The Nuts and Bolts of PropCo-OpCo" series); AFIRE OpCo-PropCo opportunity analysis; Thesis Driven OpCo/PropCo workshop materials; Pacific Workplaces (pacificworkplaces.com); Caddo Office Reimagined (caddooffices.com); Expansive (expansive.com); Industrious / CBRE public filings; Bisnow flex space coverage; Propmodo coverage of landlord-operator partnerships.