The desire to provide office spaces where people can thrive has fundamentally changed the way we build, operate and interact with our workplaces and our cities. So while coworking is deservedly popular, perhaps it’s just as important to ensure we continue nurturing a diversity of working styles and fitouts that suit the workforce they serve, writes CI’s Associate Director of Leasing, Anthony Merrett.
It has been reported that coworking spaces have increased in Australia by 62% since 2017. This rapid growth reflects the diverse nature and continued generational change of today’s workforce. And it is predicted that by 2030, 75% of the workforce will be comprised of Generation Z and Millennial employees. These generations crave dynamic, flexible and tech-enabled working environments that reflect the changing ways in which we now work, live and play, that were unprecedented some 5-10 years ago.
We know that coworking fosters innovation – a major growth engine of Australia’s successful economy and business markets – with many coworking spaces dominated by entrepreneurs who are motivated to share their expertise and work closely with like-minded professionals.
There’s no denying that the continued growth of coworking has challenged the conventional commercial office, in both form and function. One change we’ve seen is the reduction of space ratios required in coworking spaces. Occupancy for one person can be as low as 6sqm, whereas in a typical office space, it is one person to every 10sqm - 15sqm. Given coworking spaces are now a very real part of many commercial buildings across Sydney, landlords have had to modify their buildings to cater for this increased density; including ensuring sufficient amenities, lift and fire services and more resilient and capable heating and cooling systems.
A key benefit for businesses of coworking is the flexibility of both space and term, which the traditional commercial lease, typically offering three-year terms, has not been able to compete with. Another way coworking has challenged the leasing market is the reduction in demand for smaller serviced office suites – ones that were initially designed by landlords with these very start-ups or growing businesses in mind. And when there’s significant capital to be saved for tenants through fitout and cost amortisation, through shared service costs such as printing, phone and internet connections, board rooms, break out spaces and more, it’s clear to why the model has gained pace.
While this has and is continuing to create some tension between coworking operators and landlords, many landlords are championing innovation to take advantage of this changing market.
Some are building dedicated floors and in fact, entire assets specifically designed to attract the typical ‘coworking tenant’ directly into their buildings. We’ve seen this unfold with Dexus’ exciting SuiteX initiative; the evolution and extension of its highly successful Dexus Place offering that first launched in 2015.
Just as the ever-popular Uber has evolved and adapted since its introduction, most recently with the launch of ride sharing option UberPool, so too has coworking since its launch into the market. New players have entered and created competition and fragmentation beyond the global giants such as WeWork. This has given tenants more choice of their provider and in some instances, afforded negotiations on rental terms. Coworking is also no longer just for small businesses either – larger corporations are utilising it during times of growth, for project/temporary space including at times of unforeseen growth, as are those looking to provide an alternative to their fixed space for employees.
And at the same time, some coworking operators who are aware of the demand for their offering and keen to capitalise on it are changing tact and looking to become office investors – no longer just tenants – a move which brings with it its own set of implications for the investment market.
However, the wider and perhaps more ‘traditional’ aspects of market have also, and will continue to, evolve organically. Buildings must foster the health and wellbeing of their occupants and this is commonplace nowadays with designs and concepts such as ‘bringing the outdoors in’ with greenery, standing desks, quiet zones and more. Companies are finding through trial and error what types of fitouts and space arrangements work for them, whether it’s the successful adoption of Activity-Based Working, a mix between fixed and coworking space, or the creation of a bespoke design that reflects the needs their workforce, whether it be set desks with more collaborative areas, or a higher percentage of quiet rooms depending on needs and business aims.
Coworking is a natural development in today’s fast-paced world and a reflection of the successful sharing and trade economy that not only Uber but the likes of Gumtree, Airtasker and GoGet have built a business off. So while its prominence has been a challenge in some ways for the more conventional office space, perhaps the future is more about embracing all different types of office models as equal, and adapting to new ways of working, together.
Associate Director, Leasing
This article was originally published in our North Shore Office Market Report.
Image: Work inc at Sydney's Lavendar Bay | workinc.com.au