Smaller coworking firms are struggling to provide the full suite of services that are increasingly in demand by users and this is opening the way for “disrupters” such as hotel operators to enter the industry, a new report says.
Lounge areas, spaces for events, meeting rooms, wellness facilities and food and beverage areas are all in demand by office workers and, while many larger coworking operators are beginning to implement or develop these services, smaller operators may struggle to cater to the demand, which will create an opening for hotel operators, according to Colliers International’s APAC Flexible Workspace Outlook Report for 2019.
“This trend could see operators disrupted as providers of these services, as we observe that few can deliver a full range of amenities at this stage. This leaves an opportunity for hotel/hospitality operators to step in to fill the market opportunity given the model is essentially akin to transferring hotel concierge services into commercial real estate,” the report says.
There was an increasing demand across the Asia-Pacific region for coworking facilities that had a high level of amenities.
“While there is certainly a place for the rough and ready ‘coworking’ space and the executive serviced office of old, we believe that genuine premium product will rise to prominence in the flexible workspace sector in 2019,” the report noted.
Local operators are already seeing this happen.
Brad Krauskopf, who co-owns and runs the country’s largest privately owned coworking operator Hub Australia, said coworking businesses were attempting to differentiate themselves from one another by pitching their services as a hospitality offering.
“Coworking has evolved to become a hospitality industry and we’re all offering different levels of service, servicing different businesses and different industries, and priced differently,” Mr Krauskopf told the Sydney Morning Herald and The Age.
Australia gets a head start
Australia’s office market is already leading the Asia-Pacific when it comes to setting an “amenitisation” precedent, the Colliers report says.
“Australia is highly regarded in Asia as being a more mature market when it comes to landlords offering such amenity in their buildings,” said Rowan Humphreys, tenant advisory director at Colliers.
“We saw this first with end-of-trip facilities and basic third-spaces in building lobbies. However, we are now seeing an evolution to incorporate flexible space.”
Mr Humphreys said a local example of this was AMP Capital’s forthcoming Quay Quarter development, which was set to be completed in 2022.
“Quay Quarter Tower will have significant retail, food and beverage offerings along with an extensive flexible workspace that is likely to include meeting room and conference facilities available for tenants within AMP Capital’s national portfolio to utilise; all of which is being designed to ensure a seamless and curated offering for customers,” he said.
Boutique products, new operators
Among the other predictions contained within the report, Colliers is anticipating an upsurge in specialist coworking operators in 2019, as niche industries seek facilities that specifically cater to their requirements.
The report cites Campfire, a Hong Kong-based coworking operator that is set to open a new site in Sydney’s Pyrmont in the coming year, as an example.
“As the sector matures we foresee industry specific offerings emerging to offer greater diversity and service differing needs. Campfire has been the leader in this regard to date, with spaces specific to fashion, media, fintech, hospitality and design.”
Even the sector’s dominant players, such as WeWork, are set to diversify their offerings in the year ahead in order to capture a growing section of commercial real estate market.
“In addition to the usual hot-desk, fixed-desk and private office options, there are more products coming to market such as those pioneered by WeWork, including WeWork GO, which allows users to pay as you go; Powered by We, which is a standalone design-and-build concept; and HQ by We, which delivers bespoke solutions,” the report said.
Brisbane market owes plenty to coworking
Australia’s largest office markets have seen a significant increase in the number of coworking leasing deals, with Sydney flexible workspace market growing by 47 per cent in 2018.
Tight inner-city leasing markets in Sydney and Melbourne mean that operators looking to break into the local market or expand their current offerings may have to look beyond the CBD core in 2019.
“Even tighter vacancy and limited new supply [in Sydney] may ultimately limit deal flow, which may lead to some operators having a closer look at the North Sydney, city fringe and metro markets.”
The report’s authors attributed the fall in Brisbane’s vacancy rate – to a five-year low of 13 per cent – to strong demand from the flexible working sector, stating that Brisbane was the capital city with the largest percentage of flexible workspace occupancy of CBD stock (2.8 per cent) with more operators expected to come onboard.
“The Brisbane office market remains an attractive location for flexible workspace operators given the large number of small businesses operating in Queensland, in particular we’ve seen larger scale operators like IWG looking to expand their footprint in Brisbane,” said Nick Davies, manager of tenant advisory at Colliers International.
“There are reports of further new flexible workspace operators that are in the process of negotiating new locations across both the Brisbane CBD and the fringe markets, which will further contribute to the absorption of existing and newly developed stock.”
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