A Coworking Investment? Why Landlords Should Provide Flexible Space
Flexible space is not a fad. JLL predicts that by 2030, flexible workspace – which includes coworking and serviced offices – could comprise as much as 30% of commercial property portfolios worldwide. In the APAC region alone, the amount of floorspace used for flexible space has increased by a whopping 150% from 2014 to 2017. It’s no surprise that landlords like Lendlease, CapitaLand, CDL, and Keppel Land are partnering with operators or operating their own coworking solutions. To get a real-life scenario, check out our article covering CapitaLand’s big coworking investment — their landmark partnership with The Work Project and acquisition of Collective Works.
How can landlords—best known for “traditional offices”—tap into the world of coworking? The answer lies in the “core-flex” model, whereby businesses occupy both long-term office space (the “core” headquarters) and coworking (the additional “flex” space). Larger enterprises may use flexible space as satellite offices, to serve as a buffer for sudden changes in headcount, or to simply provide more workspaces options for employees. Coworking is no longer reserved for startups. HSBC, for example, famously leased out three floors worth of coworking space from WeWork in Hong Kong.
Given the growing demand for flexible space, it’s no longer something that large landlords can ignore. Ultimately, there are three main advantages of coworking for your buildings:
- A coworking investment could increase the valuation of your building. Currently, coworking giant WeWork is valued at approximately $45 billion—a figure that testifies to the immense global demand for coworking. On top of an existing portfolio of long-term offices, an investment in coworking spaces can serve as another revenue stream for landlords. Flexible leases allow for a rapid turnover of tenants, resulting in steady cash flows for operators.
- Adds a new amenity for tenants. Landlords can offer a more diverse range of workspace options for both existing and new tenants. Office buildings can experience increased foot traffic, both internally as well as to surrounding retail and commercial spaces. To top it off, with both flexible and long-term options in one building, tenants only have to deal with one landlord for multiple workspaces.
- Enables partnerships with coworking brands. Ultimately, a successful coworking investment is not just a physical space—it’s an ecosystem requiring strong engagement and community-building skills. Through a joint venture model, landlords can leverage on the expertise and know-how of prominent coworking brands. In turn, these brands can benefit from landlords’ extensive capital and resources. For landlords, such partnerships help to consolidate the market and reduce competition.
GorillaSpace partners with all the leading flexible space operators. Are you considering adding coworking to your property portfolio? We’re here to help—whether it involves helping you start your own coworking space or partnering up with brands that share your vision. Contact us now at +65 3163 6839 for a personalised conversation or drop us an email at [email protected].