WeWork inks largest Sydney deal yet

WeWork inks largest Sydney deal yet

26 July 2019

Co-working giant WeWork has secured its largest lease to date in Australia, snaring a prime spot in Pitt Street, Sydney, further confirming the strong demand for flexible office space across capital cities, says The Sydney Morning Herald.

The new 11,000-square-metre lease—10 floors in all—is WeWork’s tenth acquisition in Sydney in just three years, and it increases its footprint in Australia to 15 sites across Sydney, Melbourne and Brisbane.

Additional locations—including its first site in Perth aimed at project-based businesses in Perth’s volatile mining-driven economy—are on track to open in September this year.

WeWork has taken a 12-year term on the repositioned Pitt Street building, which is owned by ARA Australia, negotiating a ground floor entry and exclusive use of the low-rise building in the heart of Sydney’s CBD.

Major upgrade works are already under way and will include a new lobby and end-of-trip facilities.

The 29-storey property at 320 Pitt Street is strategically positioned between Town Hall and Museum stations, is in the city’s mid-town precinct where until now WeWork has not had a presence.

WeWork Australia and New Zealand head of real estate Lachlan Buchanan said the new lease will provide space for companies ranging from start-ups to large international enterprises to thrive.

“320 Pitt Street has a wonderful ability to cater for larger requirements, allowing our members to scale quickly as well as support the large enterprise companies who now represent over 40 percent of our global membership,” Mr Buchanan said.

Aaron Weir, partner, head of office leasing, NSW, at Knight Frank said securing WeWork to the repositioned 320 Pitt Street will provide optimum flexibility for occupiers.

“Tenants’ accommodation needs can be met on a traditional, direct basis or as a flexible corporate real estate solution, which is located within the same tower. Flexible workplace solutions are high on the list of priorities for corporate occupiers globally,” Mr Weir said.

The transaction comes amid reports WeWork’s chief executive Adam Neumann has cashed out at more than $US700 million ($995m) ahead of WeWork’s initial public offering later this year.

While the local co-working industry is still in its infancy—comprising less than 2 per cent of assets in Sydney and Melbourne —it has experienced a rapid rate of expansion in the past few years, says the AFR.

Sydney and Melbourne are now each home to more than 250 co-working spaces, and that number is forecast to rise as new Chinese and Indian players enter the local market.

Traditional landlords, like GPT and Dexus, are also competing for a slice of the co-working pie by partnering with co-working operators, launching their own ‘co-working’ model, or just offering more flexible space within their buildings.

The co-working push comes as Sydney and Melbourne office vacancy rates are at near record lows, which has consequently pushed rents to near highs.

The Property Council of Australia will release its bi-annual office market report on Thursday August 1 and will reveal how tight the space is for leasing.

While there is some supply coming into the markets, particularly in Melbourne, leasing agents say the space is being ear-marked by the co-working office and tech tenants, as well as the traditional banks.

There is also a dash for space by financial institutions which are looking to divest wealth management operations as a result of the recommendations from the Banking Royal Commission earlier this year.