Benefits and traps of co-working
The rapid growth of flexible work spaces has accelerated in big cities and is changing the structure of office leasing.
In a new report, CBRE says that although there have been many reports from the perspective of tenants there are major implications for landlords.
In the first half of 2018 about 15 per cent of office leasing transactions involved flexible spaces in the Asia Pacific region.
Smaller co-working operators were less profitable than larger ones capable of surviving business cycles.
Flexible workspace has become a catch-all term to encompass any office space leased for a short period of time, whether on a deskby-desk basis or on a larger scale, CBRE researchers said.
From 2019, International Financial Reporting Standard 16 will change accounting practices for occupiers of real estate, eliminating off-balance sheet reporting and requiring them to recognise most leases on balance sheets as liabilities.
Since any lease obligation of less than 12 months is exempted and can still be booked as an expense, CBRE expects more occupiers to look for shorter-term leases in flexible spaces.
‘‘Despite their unquestionable enthusiasm, occupiers hold several concerns about flexible space, at the forefront of which lie the perceived lack of data security and privacy.
‘‘Among large corporates, worries typically focus on the potential dilution of their corporate culture when locating employees in flexible space, as well as potential culture clashes with other occupants.’’
These concerns, along with the availability of specific amenities, plus acoustics, ergonomics, and employee health and safety concerns, prevent many tenants from increasing their amount of flexible space
Owners of prime buildings – new or refurbished with high specifications – benefit less than owners of secondary grade buildings where flexible spaces can achieve an increase in value of 5-10 per cent because rents can be double that of traditional leases.
Globally, China and India have the biggest flexible workplace markets with smaller amounts in Australia and New Zealand.
Most landlords lease space to flexible space operators, but some take on the risks and do it themselves. Sometimes a revenuesharing agreement reduces risk to both parties.
CBRE said leasing of flexible space usually involved new tenants rather than relocations, renewals or expansions.
Advances in technology are allowing more employees permit mobile working and computing, allowing them to access information and work other locations. About 80 per cent of companies have adopted mobile working policies.
Some companies traditionally located in central cities are introducing hub-and-spoke models to reduce their office footprint in expensive areas. Companies are also using freelancers and independent contractors.
In the short term, CBRE Research believes the continued expansion of flexible space will drive a structural shift in office demand.
Researchers found 33 per cent of occupiers plan to increase their use of co-working space, while another 15 per cent and 11 per cent intend to increase their use of incubator centres and serviced offices, respectively.