Melbourne leads booming co-working sector

Melbourne leads booming co-working sector

17 May 2019

Melbourne is on track for a record year of co-working office space deals with 17,000 square metres already leased in the city in just the first quarter of 2019, the AFR reports.

Newcomer to the local market, Singaporean co-working operator JustCo, was responsible for jump start by taking out three co-working leasing deals across the Melbourne CBD totalling 17,000 square metres.

New data from JLL reveals that JustCo’s take-up of space in the first three months of this year is already more than half of the total 2018 leasing activity in Australia’s CBD markets.

The total Melbourne co-working leasing activity since 2015 is now 71,300 square metres, the most in the country.

A recent report from LaunchVic said the availability of co-working spaces in Melbourne—now more than 170 sites—has grown 960 per cent over the past three years, accounting for nearly half of the total volume of co-working sites across Australia.

Two out of every five Melbourne firms have accessed a co-working space during the past 12 months, the report said.

The changing nature of work due to technology, and demands for worker flexibility are contributing to unprecedented growth in the co-work space sector.

The 2019 annual International Workplace Group Global Workspace Survey reports 50 per cent of employees globally are now working remotely for at least half of each week, and two thirds of permanent workers in non-co-working offices spend at least one day each week outside their traditional office.

In addition to dedicated co-working companies, more and more businesses with excess office space are tapping into the flexible leasing market to offset overheads and generate additional profit by leasing their excess space to other companies directly.

Businesses are asking why can’t we lease out our spare office space, or that space in the corner, or that bank of eight desks? says co-working space provider Rubberdesk founder, Jim Groves.

JLL’s head of office leasing in Australia, Tim O’Connor, said more co-working lease deals would occur throughout the year as space became available.

“We are still in the ramp-up phase for many of these operators so it’s almost inevitable that we’ll see more take-up until operators are satisfied with their penetration in the market,” he said.

While Melbourne and Sydney are co-working hotspots, operators are now expanding their horizons to other state capital, especially Perth and Brisbane.

WeWork entered the Perth market in Q1 2019 by offering flexible working space at 152-158 St Georges Terrace, while rival operator Regus added 300 Murray Street to its portfolio.

“Perth is perfect for these operators, because it’s still dominated by the mining sector and they have a lot of projects, so their employee size can grow very quickly,” JLL’s head of research in Australia, Andrew Ballantyne, said.

“Also the engineering and consultancy firms over there can go from next to nothing to being very large organisations by winning a big project from, say, BHP or Rio, so if you look at all the markets you could say Perth has the largest requirement for these types of users because of the project-based nature of the economy.”

Not all co-working providers, however, have been able to establish themselves in the highly competitive market.

Last month, prominent Queensland-based co-working space and business incubator Little Tokyo Two was placed into voluntary liquidation, with founder and entrepreneur Jock Fairweather sending a message to members and supporters saying the business had become “unsustainable”, reported.

Founded four years ago, Little Tokyo Two (LT2) had five locations across Brisbane and the Gold Coast, which primarily offered a co-working space service to start-up founders and aspiring entrepreneurs. However, the business had also recently expanded into offering incubation services and ‘growth plans’ for start-ups.

Mr Fairweather said while the incubation offerings had performed well, the co-working model had become unprofitable and criticised new market entrants for “undercutting” prices.

Source: LaunchVic