Co-working trend enters SA
New system allows tenants to sign different lease packages, including a pay-as-you-go option
The co-working or flex space trend is poised for rapid adoption in SA as commercial tenants become increasingly averse to being locked into rigid, long-term lease agreements.
It is estimated that SA already has more than 80 co-working premises, the bulk of which are located in Johannesburg’s key business hubs of Sandton, Rosebank and Rivonia as well as in Cape Town’s city centre and V&A Waterfront. Local co-working brands that are gaining traction include Workshop17; The Workspace; Flexible Workspaces; Business Exchange Group; Perch Flexible Offices, a Grapnel Property Group initiative; Spaces, which is owned by Regus parent company IWG; and Futurespace, a joint venture between Investec Property and Giant Leap.
US coworking giant Wework’s recent decision to extend its global footprint to SA is expected to further revolutionise where, how and when South Africans work.
The New York-based company recently signed a deal with Jse-listed Redefine Properties to take up
12,800m² spanning six floors in Rosebank Link, a new 15storey building on Oxford Road opposite the Gautrain Station in Rosebank.
Redefine has in recent months also signed leases with other co-working brands including Regus, Flexible Workspaces and the Business Exchange Group, which are collectively taking up another 12,000m² in some of the group’s commercial buildings in Johannesburg.
Interestingly, it’s not only entrepreneurs, freelancers, startups and SMES that are looking for an alternative to the home office. Redefine commercial asset manager Pieter Strydom believes increased take-up of flex space in SA is driven primarily by corporates looking to reduce capital spend. As such, more and more companies are moving their shortterm, project-based operations to co-working spaces, he says. “Also, in the current volatile business environment, smaller businesses are not willing to commit to longterm leases.”
Strydom says co-working has also become a lifestyle choice, especially among millennials who want to work in interesting, creative spaces in prime locations where they can collaborate with a community of like-minded individuals. The take-off of the co-working trend in SA is not only bringing more choice and flexibility to tenants but it also benefits landlords. Strydom says commercial property owners now have access to a large client base that they previously would not have engaged with due to the short-term nature of flexible rental agreements.
Traditionally, office tenants would have no choice but to sign a lease of at least three to five years at a fixed monthly rate and a built-in annual escalation. The latter typically averages 7%-8% a year. Moreover, tenants are locked into leases and face hefty penalties if they want to vacate the premises before the lease comes up for renewal. This is in stark contrast to co-working offerings, which allow members to sign up for different packages. Some have a pay-as-you-go option while others offer three, six or 12-month contracts for a fixed monthly rent from as little as R1,000. Members have access to business infrastructure including a front reception desk, office supplies and highspeed internet. Often, free food and beverages are thrown into the deal.
Strydom says concluding structured transactions with co-working brands de-risks the relationship for the landlord as the head