Corporates ‘fastest-growing’ sector of co-working space

Corporates ‘fastest-growing’ sector of co-working space

15 March 2019

Multinational companies are slowly becoming the dominant tenants in flexible and co-working office spaces, as the appetite for flexible working spaces grows and changes in accounting standards drive up short-term leasing, says the AFR.

A third of co-working provider WeWork’s space in Australia is leased to multinationals and large companies.

Also, Victory Offices just opened its latest Sydney location with 30 per cent of its space already leased to multinational companies.

“We’ve seen an increase in interest from larger, established firms over the past 12 months, as strong business confidence fuels their own expansion, as well as a cultural shift in the way their staff like to work. I have no doubt that will continue this year,” Victory Group CEO Dan Baxter said.

Changes in international accounting standards also mean that while businesses have to report long-term leases, leases under 12 months can stay off the books, making short-term commitments attractive, Mr Baxter added.

“The IASB change is one incentive, but as businesses are confronted with an increasingly mobile workforce, they have another reason to look for more flexible cost-effective lease arrangements,” he said.

The original consumers of the co-working and flexible office space were start-ups, sole traders, and young companies, but this is evidently no longer the case.

Since launching its “enterprise” business three years ago, enterprise or corporate members have become the fastest-growing segment of our membership base, WeWork said.

Up to three-quarters of all tenants occupying 30,000 square metres or more across their portfolio intended to cut their traditional leased office footprint, and all planned to increase their use of co-working space, a CBRE report last year showed.

Research by JLL says flexible spaces like co-working will overtake the traditional serviced office model by 2020 as more and more corporates jump on board.

Operators need a diversity of products offering more than just one kind of flexible space. Both WeWork and Victory are evolving towards this model offering both co-working as well as traditional office suites.

“The flexible working space is not going away but it is going through early-cycle strong growth and we should see that stabilise in the next 3 to 5 years,” Investa’s Head of Research & Strategy David Cannington said.

WeWork sees the increase in enterprise or corporate clients as part of that growth, head of real estate Australia & New Zealand Lachlan Buchanan said.

One example was Microsoft, which while based in the northwest of Sydney had a large private office at one of the CBD hubs for meetings, he said.

“Increasingly, we’re finding that larger companies are choosing a collaborative workspace in order to be part of a dynamic, more creative and entrepreneurial environment,” he said.