Large corporate tenants are now leading the charge towards co-working space, which has moved beyond the realm of the start-up into a mainstream office procurement practice.
Up to three-quarters of all tenants occupying 30,000 square metres or more across their portfolio said they intended to cut their traditional leased office footprint, and all planned to increase their use of co-working space, according to the CBRE Pacific Corporate Co-working Survey 2018.
In line with the figures reported by rival agency Knight Frank last year, CBRE says the flexible workspace industry occupies about 193,200 sq m of space across the six major capital cities in Australia, with 40 per cent of occupiers utilising some form of flexible workspace solution
In the next two years, 58 per cent of Australian corporate occupiers plan to reduce their traditional leased office footprint space and 55 per cent are looking to increase co-working space use, the CBRE says.
It’s a growing market that existing providers such as ASX-listed GPT Group are increasingly tapping. GPT has just opened its fourth Space & Co co-working hub in Melbourne (and its fifth nationally) in a joint venture with Frasers Property at Level 19 of 2 Southbank Boulevard. The BVN-designed 1850 sq m venue occupying a full floor of the building is already 40 per cent occupied by tenants including Uber.
“We continue to see strong demand for our co-working spaces,” said Shey Hooper, GPT’s national director of flexible workplace solutions. “It’s this growth in the demand for flexibility in lease terms and workspaces, where Space & Co see the strongest opportunity.”
While this doesn’t necessarily mean a smaller footprint, it does give employers the flexibility to expand and contract their workforces as necessary. But it does represent a challenge for large landlords providing these spaces, because clients want flexibility but not the casual flexibility that has dominated the market to date. In fact, only 32 per cent of Australian employers considering co-working said they would choose a building with an existing operator in place.
“Blue-chip corporates are concerned about the profile of the building,” said Felice Spark, CBRE’s head of office and occupier research. “If you’re KPMG, for example, you want to be associated with a CBA, or a similarly blue-chip corporate tenant profile. To have WeWork in the property and half the lift full of people in flannels shirts and thongs – those things can be a bit of a culture shock.”
Crowding is another factor. Co-working spaces have a tight population density – of about one person every five or six square metres – at least twice the density of many workplaces, and that puts some tenants off.
“That puts a lot of pressure on services including airconditioning and lifts,” Ms Spark said. “It can be a little bit of a negative.”
Corporate landlord Investa has not yet named the coworking operator that will operate in the Hassell-designed 60 Martin Place building it will open next year in central Sydney, anchored by law firm Norton Rose Fulbright, but says flexibility is a crucial part of what premium buildings offer.
“We aim to select the operator that best complements the style and profile of the building or location,” said Michael Cook, Investa’s group executive, property.
“Premium tenants want a sophisticated offering that matches their business objectives and the expectations of their employees.”
One large corporate user planning to increase its use of co-working space is government. As many as 60 per cent of government respondents to the survey said they intended to reduce their traditional leased office footprint. This was because of the perceived collaboration benefits but also the scope for more-efficient use of space, Ms Spark said.
“When we’ve done occupier surveys, government has the largest workspace ratios,” she said. “There would be a three-to-five-square-metre difference compared with finance or professional services groups.”