Australia’s co-working market will undergo consolidation from next year, as players push for scale in the growing industry to meet increasing demand and to negotiate better deals with landlords, Hub Australia founder and chief executive Brad Krauskopf says.
Consolidation will not be immediate, as the still-evolving market will take a year to recover from the disruption that saw global giants such as WeWork and JustCo shake up the Australian co-working space by building up scale quickly, said Mr Krauskopf, whose privately owned company has just secured its fourth site in Melbourne and its eighth nationally.
“Co-working is going to continue to require scale and landlords are going to continue to want to deal with reputable operators with solid businesses,” he said.
“To this end I do see consolidation is going to take place. You are going to see further international players come to Australia, but first, 2020 will see everyone focus on the market they’re currently in.”
The comments by the founder of Australia’s largest privately owned co-working business echo comments from CBRE chief executive Phil Rowland last year that the highly fragmented sector would consolidate and undergo a correction after a frothy period.
“The operators committed to expensive space, they gave discounts to customers to get occupants and they paid brokerage, too,” Mr Krauskopf said.
His family still owns a majority stake in the Hub Australia business – which he said had been profitable for the past two years. Investor Wingate, which first invested in 2017, now holds almost 42 per cent following a $12 million equity-and-debt capital raising late last year, company records show.
Hub Australia had not had any approaches to acquire it, but he did not rule out the idea of selling out, Mr Krauskopf said.
“We will continue to operate the business and evaluate every strategic opportunity,” he said.
Hub Australia will take three floors of the historic Ball & Welch building at 180 Flinders Street, the Dexus-owned property that John Holland is renovating into a 20,000-square-metre office building overlooking Melbourne’s Federation Square.
The Hassell-designed 4404-square-metre co-working space that will open after the building’s scheduled completion in August will give the local company a presence on the CBD’s southern edge and close to Flinders Street train station, complementing its Spencer Street facility in the west, its 1 Nicholson Street premises on the north-eastern corner and its more central 162 Collins Street space. SJB Architects designed the building redevelopment.
“It completes our coverage of Melbourne’s CBD,” Mr Krauskopf said. “It also provides another truly premium location.”
Hub Australia’s recent capital raising will fund further growth, including of a soon-to-be announced ninth national location in Sydney.
Hub’s growth aims to give it scale in an Australian market in which co-working accounts for only about 3 per cent of the country’s office space – a figure that Mr Krauskopf said would grow sharply.
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