All ArticlesIndustry Trends

Why the rise of co-working spaces is not a threat to the traditional commercial real estate

While some in commercial real estate see the meteoric rise of co-working as a potential threat, it’s actually an opportunity, according to two industry experts.

Queensland real estate agent Leon Carlile and Martijn Roordink, the chief executive and co-founder of Dutch workspace provider Spaces, say the growing demand for co-working office space is good, not bad news for the commercial sector in Australia.

Inspire9 Co-working

Co-working spaces offer expansion opportunities for commercial real estate. Picture: Inspire9

Commercial property holders often see co-working as a threat on two fronts.

First, shared office space providers don’t just lease traditional office buildings; they look at unique spaces like converted warehouses, so landlords fear it raises the possibility of increasing office vacancies. They also worry that small businesses using co-working space would otherwise take up their own longer-term lease in an office building.

But Carlile, a real estate agent and managing director of Toowoomba-based Qld Hot Property, says it’s an opportunity to secure a more diversified tenant base and a more reliable income stream.

“Traditional commercial real estate holders will still receive their expected income on their properties, as co-working arrangements still have to lease the entire larger tenancies. From there, the larger tenancy is then sub-let to smaller tenants.

“What co-working really promotes is those businesses who may have previously worked from a home office or out of their garage into a larger tenancy, which they wouldn’t have previously had access to under traditional leasing arrangements,” Carlile says.

co-working space

The expansion of co-working is a chance to rethink commercial real estate. Picture: Getty

He says holders of larger commercial properties benefit from a more diversified tenant base through the sub-leases and a lower likelihood of the head leasee not being able to pay rent.

“All-in-all, co-working shouldn’t be seen as a threat to traditional commercial real estate holders, but as an encouraged change in the space which is only expected to grow as time goes on.”

Roordink, the boss of Spaces – which has more than 200 locations across 39 countries, including three in Melbourne and one in Sydney – says landlords need to adapt their existing product to meet the changing needs of tenants – who see great value in co-working.

“As the demand for more co-working spaces is on the rise, this is an opportunity rather than a threat for commercial real estate holders, as they can smartly invest in co-working office providers to attract more corporations into their buildings,” Roordink says.

He says with workplace providers like Spaces looking at opening more locations across Australia in 2019, commercial real estate holders must see “the value in capitalising on co-working.”

Find the right space for your business on Spacely

Like us on Facebook to stay up to date with all things Spacely:

Check out these related articles