Colliers International launches survey of Australian landlords and the impact of co-working
“In many ways, co-working groups have chosen an opportune time to expand rapidly in Australia, as consistent low office vacancy in Sydney and Melbourne coupled with strong white collar employment growth has created a ready market of office-based workers needing a workpoint,” Simon Hunt, Colliers International Managing Director of Office Leasing, said.
“Add to that the growing requirement from corporates to have flexible expansion and contraction options, as well as an ongoing trend for office space that more reflects the needs of a younger cohort of workers, and co-working groups have found themselves a wide gap in the market waiting to be filled.”
Anneke Thompson, Colliers International National Director of Research, said while the occupier side of office markets was evolving rapidly, a concurrent change in the way most purchasers invested in office buildings had yet to be felt to anywhere near the same extent.
“It is true that while new market entrants from all points of the globe continue to enter Australian office markets, the underlying attraction of the assets they purchase remains unchanged from years’ past – long term, fixed growth income streams from strong covenants in large, secure markets,” Ms Thompson said.
“When compared to major office markets such as Manhattan and London, co-working groups occupy a small percentage of office space in Sydney, Melbourne and Brisbane.
“However, they continue to grow faster than most other occupier groups and will be a growing force in the pre-commitment market, which is a traditional source of investment stock for major office investors.”
Colliers International have sought out the opinions of some of the market’s leading office owners and investors to gather their overarching views of the market and to understand how they expect co-working groups will impact occupier and investment markets going forward.
Overall, the majority of both leasing and investor clients believe co-working has a positive impact on their business/portfolio. In total, 77% of investor clients ‘strongly agree’ or ‘agree’ that co-working groups have a positive impact on their Australian investment portfolio.
No respondents chose to ‘disagree’ or ‘strongly disagree’ with this statement, and only 23% believe the impact is ‘neutral’. A smaller majority (65%) of leasing respondents ‘strongly agree’ or ‘agree’ that co-working has a positive impact on their business, while 25% chose ‘neutral’ and 10% chose ‘disagree’ or ‘strongly disagree’.”
“In our view, this slightly less positive response from leasing clients perhaps is likely to reflect their reality of managing the impact of co-working groups on their assets and overall building/tenant management,” Mr Hunt said.
Leasing landlord clients were more positive on the impact of co-working groups on the market, than on their own business. Most agreed that co-working was positive for the market (90%), although a smaller proportion (65%) believe co-working is positive for their business.
“These answers are relatively unsurprising given the infancy of the co-working industry in Australia. However, we see great potential for co-working groups to work with landlords to ensure positive experiences into the future,” Mr Hunt said. “This is most important in Sydney and Melbourne, where space opportunities are few and far between, and co-working groups are competing with traditional tenants for limited space.
“We see a significant opportunity for co-working groups to communicate their business plans more closely with building owners, which may help more owners change their view to see co-working groups as more of ‘a partner’ as opposed to a “normal” tenant or a competitor.”
62% of investor landlords surveyed believed the inclusion of a co-working tenant had ‘no impact’ on the end value of a building.
“While there appears to be some uncertainty as to a co-working group as a tenant covenant, there is
less concern with the valuation impact,” Dwight Hillier, Colliers International Managing Director of Valuations, said.
“There appears to still be some uncertainty amongst the investor community as to the strength of a co-working covenant, although encouragingly a strong proportion of investors are as comfortable with co-working groups as a tenant as they are with any other industry type.”