IWG Larger Australian firms plan to ditch traditional leases: CBRE survey

Almost 60% of Australian corporate occupiers, as well as government departments and agencies, plan to reduce their traditional leased office spaces in the next two years, while 55% plan to expand the use of co-working spaces, according to a survey by CBRE. It also revealed 32% of Australian employers pondering co-working said they would seek a space that had an existing operator in place, while others sought a more sophisticated atmosphere than an informal, traditional co-working hub.

"We continue to see strong demand for our co-working spaces," said Shey Hooper, GPT's national director of flexible workplace solutions. "It's this growth in the demand for flexibility in lease terms and workspaces, where Space & Co see the strongest opportunity."

Landlords' challenge

While this doesn't necessarily mean a smaller footprint, it does give employers the flexibility to expand and contract their workforces as necessary. But it does represent a challenge for large landlords providing these spaces, because clients want flexibility but not the casual flexibility that has dominated the market to date. In fact, only 32 per cent of Australian employers considering co-working said they would choose a building with an existing operator in place.

"Blue-chip corporates are concerned about the profile of the building," said Felice Spark, CBRE's head of office and occupier research. "If you're KPMG, for example, you want to be associated with a CBA, or a similarly blue-chip corporate tenant profile. To have WeWork in the property and half the lift full of people in flannels shirts and thongs – those things can be a bit of a culture shock."

Crowding is another factor. Co-working spaces have a tight population density – of about one person every five or six square metres – at least twice the density of many workplaces, and that puts some tenants off.

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"That puts a lot of pressure on services including airconditioning and lifts," Ms Spark said. "It can be a little bit of a negative."

Corporate landlord Investa has not yet named the coworking operator that will operate in the Hassell-designed 60 Martin Place building it will open next year in central Sydney, anchored by law firm Norton Rose Fulbright, but says flexibility is a crucial part of what premium buildings offer.

"We aim to select the operator that best complements the style and profile of the building or location," said Michael Cook, Investa's group executive, property.

"Premium tenants want a sophisticated offering that matches their business objectives and the expectations of their employees."

Not all tenants seeking flexible space want the informality of a traditional co-working hub.

One large corporate user planning to increase its use of co-working space is government. As many as 60 per cent of government respondents to the survey said they intended to reduce their traditional leased office footprint. This was because of the perceived collaboration benefits but also the scope for more-efficient use of space, Ms Spark said.

"When we've done occupier surveys, government has the largest workspace ratios," she said. "There would be a three-to-five-square-metre difference compared with finance or professional services groups."