Co-working office headhunting corporates
Co-working office operators are going after growth in the corporate market, boasting of 25 to 30 per cent savings on the cost of a traditional office lease.
Numbers crunched for Hub by Knight Frank indicate a 25 per cent difference in the cost of a traditional 60-person office, leased for five years, and a 60-person space co-working licence – $819,600 compared with $612,000 a year.
The research comes as US giant WeWork opened its first Melbourne office, in the 1920s-era London Stores building overlooking Bourke Street Mall.The 5000-square-metre space covering six floors is owned by Rich Lister family the Alters. A second office is due to open at 401 Collins Street in 2018.
WeWork general manager Balder Tol said about 30 per cent of users were from the enterprise market, with corporates looking for space that can be scaled up or down depending on the length and size of projects.
“Enterprises tend to lock in for longer terms,” Mr Tol said.
That creates a steady revenue stream for operators who lease space for long periods – WeWork’s London Stores lease is for 15 years – but sell memberships that vary in length and can be as short as a month.
Space&Co national director Daniel Stiffe said about 50 per cent of its users at the GPT-owned space were from existing GPT customers. GPT is one of ‘s biggest office landlords.
“That’s where the big market is,” Mr Stiffe said.
US customer-management technology company Salesforce is taking up a whole floor of WeWork Bourke Street. In Sydney, Microsoft, Red Bull and KPMG also lease space in WeWork offices.
But there are plenty of takers at the smaller end of the market. The US giant, with 176 offices globally, opened the Melbourne office with all 700 memberships fully booked. The average cost a person is $730 a month, with prices ranging higher and lower depending on the number and location of desks.
“We are 25 to 30 per cent cheaper than traditional real estate and comparable with other similar spaces,” he said.
Knight Frank head of occupier solutions John Preece said demand was buoyant in the sub-500-square-metre office sector, making co-working an alternative to traditional leasing.
“With the additional benefit of cost savings and flexibility, this is something businesses are considering more seriously than ever before,” Mr Preece said.
Hub chief executive Brad Krauskopf said: “We’ve seen an increasing trend in businesses and corporate teams choosing co-working spaces not just for the culture benefits but also the cost savings.”
Post and Suncorp take up space in Hub’s Melbourne office. Hub is poised to open a new officenext year in Hyde Park, Sydney, where WeWork and Space&Co are also looking for new premises.
The number of co-working spaces in tripled to 309 between 2013 and 2017 but the sector remains small. At 193,190 square metres, it accounts for 0.6 per cent of the total office market, of which 50 per cent is in Melbourne and 38 per cent in Sydney.
WeWork is the biggest operator, with 13.6 per cent of the market. It grew quickly in the 12 months since opening in the n market, with 26,260 square metres of space in five locations. It is expected to control nearly 45,000 square metres by the end of the year.
But smaller operators are also proving popular. Entrepreneur Tobi Skovron opened a 350-desk space in Melbourne’s fringe office area, Cremorne, in September.
Within a week, Mr Skovron signed up 150 members for CreativeCubes and has four times as many members as planned in the first eight weeks.
JLL head of tenant representation Michael Greene said this year that Seek also said it would move to 20,000 sq m of new office space in Cremorne.
“The intention by Seek to move to Cremorne is a vote of confidence in that part of the world. We expect other companies to follow suit and consider this area’s pocket of old warehouses for their office needs,” Mr Greene said.
“Cremorne has had a resurgence with a number of smaller buildings converted for start-up, tech and creative firms that have flocked to the area.”
In Sydney, WeWork, Enero and Domain all committed to a converted warehouse at 100 Harris Street, Pyrmont.
“The marketing, advertising and media groups WPP and Publicis Group both have large requirements active in Sydney looking for office space across the CBD, fringe and North Sydney,” Mr Greene said.
“Traditionally, these type of companies are attracted to creative space but are considering all office options due to the size of the space they are seeking.
WPP New Zealand is active for 10,000-20,000 sq m of space to consolidate a number of businesses under the WPP umbrella.
Publicis also has a brief for 9000-11,000 sq m of space and is looking at a variety of areas in Sydney, including Pyrmont, Ultimo and The Rocks.