Could co-working spaces be the biggest shift in commercial property in a generation?

INVESTING

By Simone Date-Chong

28-05-2018
The way we work has been challenged so much in recent years that how, where and even why we work, has become more of a priority than ever before. From sales managers to creative millennials, entrepreneurs to digital nomads, start up teams to the staff of ASX listed companies – the face of work has changed and the demand for traditional office space has dropped significantly thanks to the rise of co-working culture

In the pre-internet, pre-mobile phone days, the routine of clocking on at a shared business location was designed by the technology of the time and the need to physically communicate with your colleagues - you had to be in the office to print reports and physically get them to someone for example. Work practices were dictated by the need for access to essential facilities such as phones, fax machines, printers, computers and mailrooms.

Fast forward less than a decade and the arrival of smart phones, laptops and the internet saw a rapid transformation that changed the face of work globally. People had more flexible options to work from home, or on the road, and slowly family and work culture started to change. Now the millennial generation have taken it up a notch, deciding how to manage their time and to work from wherever they please. As contemporary work is done across time zones and with a much more project based focus, Activity Based Working (ABW) has well and truly surpassed the traditional 9 to 5 routine, as people have become much more tuned into their own productivity rhythms. Now they can - and do - work at whatever time of the day suits them best, because lifestyle is the priority. According to data from KPMG, millennials will all start to turn 40 around 2020 and they’ll make up 42% of the workforce by 2025. Add to that the roll call of ASX listed companies restructuring into the co-working model and the traditional commercial office space is looking decidedly dull and ‘oh so 1980s’.

The result is that long-term tenancy agreements for half empty offices are becoming redundant in favour of a more flexible approach. The new work lifestyle means intensive working sessions, punctuated by less intense ping pong, air hockey or billiard sessions, if we believe the cliché. This was the earliest version of co-working, with DJs and bar fridges and Nespresso machines in abundance. But that early novelty phase of co-working spaces seems to have passed and in its place a much more serious commercial shift has taken place. According to a research report from Knight Frank last year, it’s estimated more than 1.1 million people globally will be co-working space members by the end of 2018.

Although the concept took off almost a decade ago, it has just started to gain momentum here in Australia in the last 3 years or so. By 2017 there were over 300 co-working spaces in Australia and more than 50% of them in Melbourne alone. Sydney is home to 38% of that number and the rest are distributed across Brisbane, Canberra, Adelaide and Perth. The research found that co-working space occupies 193,190 sq.m of commercial space nationally. Though the numbers (relatively speaking) are not huge, the speed of growth is - largely being fed by demand for millennials for suitable working spaces, as well as a greater shift towards professionals working freelance across the board. The shift from to co-working structures is necessary to develop the foundations that will accommodate the future workforce.

Businesses now are looking for shorter leases that offer greater opportunities for staff and company development, at the same time providing more dynamic working environments. In many cases co-working memberships provide a better suite of facilities than the previous office space may have, and all at a lower cost than a long lease and custom fit out would. From hot desks rented by the hour for individuals, to boutique spaces leasing a bank of desks for a 4 – 6 staff team, to larger bespoke arrangements accommodating 100 or more staff, co-working spaces are certainly making their mark on the Australian commercial property market, so now is the time to think bigger and much more creatively when it comes to commercial property investment.