Co-working operator JustCo, which secured five sites in less than a year in Australia’s two largest office markets, said it had been an expensive process to gain a foothold but it could make the money back.
Singapore-based JustCo landed on Australian shores last March with the lease of just over 8000 square metres across four floors at Melbourne’s 15 William Street. It now has two more sites in the city as well as two in Sydney, and had to meet market prices in the east coast cities’ tight office markets, said Sheree McIntyre, the head of JustCo Australia.
“A lease on an 8000-square-metre site is not going to be cheap, but it’s no point in JustCo committing to a lease if we can’t make the numbers work,” Ms McIntyre told The Australian Financial Review.
“We always ensure that the forecast is doable and is not a stretch.”
The hubs operator has just secured a further 5000 square metres over two floors at levels four and five of Cbus Property’s Collins Arch development at 447 Collins Street. It did not disagree with comments Hub Australia founder Brad Krauskopf last week made about the entry of large international players WeWork and JustCo creating a frothy market and pushing up rents.
JustCo’s portfolio also includes 4000 square metres at 276 Flinders Street in Melbourne as well as 5000 square metres at 175 Pitt Street and 2000 square metres at 60 Margaret Street in Sydney.
But Ms McIntyre said the operators were also able to exert sway over landlords.
“You do have some leverage,” she said. “Landlords want a secure, high-quality co-working offering in their building.”
After WeWork, caution reigns
In the wake of a tumultuous year that saw WeWork soar and then retreat as its much-anticipated IPO failed to eventuate, landlords were paying close attention to the quality of co-working operators, said Ed Knowles, Colliers International director of office leasing.
“Going forward, when transacting with the co-working companies, we’re certainly requiring good security for the assets in terms of bank guarantees,” he said.
Mr Knowles also said that while the rents JustCo had signed – in the early-to-mid $500s per square metre for William Street and the mid-$600s for Collins Arch – at a time when rival operators were competing for spaces in a market with limited opportunities were not so expensive in hindsight.
“The rents have increased 8 per cent annually, the market’s almost moved with them,” he said.
Ms McIntyre said she agreed with the sentiment of a recent Morningstar report that co-working’s penetration of Australia’s office stock would increase fivefold over the next 10 years. JustCo was willing to grow by acquisition, she said.
“I’m not on [JustCo’s] investment team but I do know they look at every opportunity or every possible network growth that there is if it’s in line with our trajectory,” she said.
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