Blog - TGC News

30 May 2018

STRATA OWNERS MUST CONFRONT COWORKING DISRUPTION

Coworking spaces are currently being hailed as a cheaper, more flexible alternative to renting small strata office space. And this is significantly changing the commercial leasing landscape as we know it.

If you’re an owner of a small strata office suite, you’ll need to stay aware of and respond quickly to this competitive threat.

What is a coworking space?

Inside look of a coworking space | Coworking article

Unlike traditional office space occupied by one company, coworking spaces typically provide areas for all types of operators to work in the same place on very flexible terms – no long-term commitment required.

For example, freelancers, independent contractors, start-ups and small businesses can use a coworking space to network and split access to a fully fitted-out office. They can also share associated services like printing and photocopying facilities, meeting rooms, recreation areas and facilities, as well as office and administrative support.

Think serviced offices on steroids in a super creative environment filled with like-minded souls.

Why are coworking spaces becoming popular?

Woman and man working outside | Coworking article

A recent study found that independent workers now make up one-third of Australia’s workforce, making contracting one of the fastest growing employment sectors. Even large corporations are starting to contract out their workforce and incorporate coworking spaces as part of their real estate portfolio. In fact, the huge coworking outfit, WeWork, have major companies on their books, particularly in overseas markets.

The majority of coworking spaces in Australia are still pitched primarily at individuals and smaller business entities. However, over the next few years, expect more and more large corporations to tap into Australian coworking as a means of staying competitive, flexible and aware of upcoming products and ideas.

What’s more, according to the Australian Bureau of Statistics, over 97 per cent of Australian businesses are small businesses (defined as employing less than 20 people). Co-working workplaces will remain attractive to start-ups and small businesses because:

  1. They don’t require long-term commitments (memberships start anywhere from one month upwards)
  2. Tenants (members) can scale up or down as required
  3. Liabilities are minimised, which makes setting up a new business less ‘scary’
  4. There’s no need for upfront capital expenditure for office furniture or equipment.
  5. All the services – internet, phone yadayadayada – are supplied. No hassle.

It’s plain to see why all of these things may make a slightly higher monthly spend on accommodation easier to swallow.

The threat to vacancy rates and rental yields

One thing is certain in any market: where there is demand there will be supply.

Following on from this rule, coworking spaces are expected to flood the market by 2019, which will push up vacancy rates and put pressure on rental yields for all office space – but, in particular, the smaller spaces.

Coworking spaces are trending around the world.

How to remain competitive as a small strata commercial office space owner

Artistic shot of a woman on a laptop drinking tea | Coworking article

There’s no doubt that coworking spaces have disrupted the traditional leasing model for commercial office space.

So, if you’re a small strata office space owner doing what you’ve always done, it might be time for a change in thinking. Just like taxi owners – now in competition with the likes of Uber and Taxify – it’s best to get with the program.

1) Offer quality fit-out and facilities

This is always an important factor in attracting high-quality tenants and offers tenants a smoother transition into new office accommodation. If you’re struggling to lease your office space now, investing in a new fit-out could be just what you need.

It may seem risky from an owner’s point of view, but there is evidence out there to suggest that small tenants prefer refurbished ‘plug and play’ office spaces.

What’s more, when commercial office space supply again exceeds demand – and it will – the Sydney market will again tilt in favour of the tenant. And, in a tenant’s market, your facilities need to be top-notch.

Put yourself in your tenant’s shoes, stay on top of design trends and keep things flexible to accommodate your tenant’s current and future requirements.

2) Offer Flexible lease terms

Be prepared to stay flexible by offering short-term leases than you might not have offered in the past. If you’re not willing to do this, then you may not be able to keep pace with new, fiercely competitive coworking spaces. We cannot overcome a challenge by ignoring it.

How TGC can help

Need help leasing your commercial office space? Speak to the team at TGC. We have over 25 year’s experience selling and leasing commercial office space in the Sydney CBD and city fringe areas.

 

Date: 30 May 2018 Author: Eric Lundberg
TGC News

About the author:

Eric Lundberg

Eric has over 30 years experience in commercial property, and has been at the forefront of the transformation of the Sydney city fringe market, dealing with the disruptive new knowledge-based industries. Eric’s deep market knowledge, broad connections, dedication and perseverance combine to provide clients' with the best creative property solutions.

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