It was only a few years ago that coworking office space was relatively unheard of in Melbourne but it is quickly changing the face of commercial real estate.
Our team has had extensive experience within this sector and we have negotiated lease terms with WeWork, Workspace365 and Campfire since the phenomenon took off.
Not a fad but a necessity
Coworking space has become a necessity for landlords in order to be able to offer flexibility to tenants within their portfolios.
These days, building owners need to be able to provide options outside typical office space or they will lose market share. It is becoming increasingly important to offer flexible options for companies that do not want or need to be bound by long lease terms.
There is a new accounting legislation that requires all leases to be declared as a liability on a company’s balance sheet. If public companies sign a lease with a coworking space provider, and if the provider has a right to move the tenant, the lease won't have to be listed as a liability.
This can be an attractive benefit to all sorts of companies that may have never considered coworking before.
Ongoing evolution in Melbourne
Coworking is an ongoing evolution in Melbourne, with the tight market making it a race for coworking operators to secure vacancies before their competitors.
We are now at a stage where major coworking companies have secured space in most of Melbourne’s premium buildings.
Phase two of the trend is now underway, with some landlords renovating smaller B-grade buildings to incorporate coworking space.
We’re also seeing some major companies like WeWork taking over whole buildings, such as 401 Collins Street and the London Stores building on Elizabeth Street.
More and more businesses interested in the coworking model
We have seen demand for coworking space originally come from small businesses, start-ups and creative and IT agencies but have also recently started fielding enquiries from large-scale companies and institutions.
Small businesses like the community feel and the opportunities for networking and collaboration with other businesses that coworking can offer.
But coworking also provides a different environment for major corporates such as NAB, and we’re now seeing them enquire about everything from traditional high-end office space, like what you get at 101 Collins Street, to creative workspace with exposed ceilings and open break-out areas.
We have witnessed a major shift to enterprise agreements with major corporates.
Major corporates are looking for flexibility, they’re attracted to the change of work environment and they’re saving on CAPEX in the short term while vacancy is low.
Take a company like BP, for example, with offices all over the world – they’re teaming up with the likes of WeWork and all their staff need is a passport to travel anywhere in the world to maintain their consistency of work.
The target for most intuitional landlords is to get some exposure to the coworking sector, which will eventually become 5.0 to 10.0 percent of the marketplace in Melbourne.
The way it is going is the big guys are getting bigger and the small guys are being bought out.