Despite the immediate negative consequences wrought on coworking by the pandemic, the sector is tipped for major expansion in coming months. Plans by major flexible providers show a substantial increase in dedicated coworking locations on the horizon, the bulk of which are rolling out imminently in major capital cities along the Eastern seaboard.
WeWork and JustCo for example are poised to open another 20,000 square metres of space in Sydney by the end of September, while WeWork has seen fresh inquiry driven by the likelihood of future disruptions and the need to fulfill long-term business continuity plans. WeWork is set to open new offices at 66 King Street and 320 Pitt Street in Sydney as well as 123 Eagle Street in Brisbane. Three new spaces from Justco, Space and Executive Centre will offer a combined 11,000 square metres of fresh space this year in Melbourne, while in Brisbane another 3700 square metres of coworking space is set to emerge. Regus and Spaces have also already opened more than 5500 square metres of new premises in Sydney. Spaces, which has 250 locations worldwide, recently opened its first Brisbane location – almost 4000 square metres tagged Spaces Riparian Plaza - covering three floors in a landmark riverfront tower. Later this year Spaces will open the five-floor Jubilee Place in the heart of Brisbane’s busy Fortitude Valley region.
In further positive news for the coworking sector, Australian funds manager RF CorVal snapped up an 8600 square metre office development in Victoria’s Collingwood at the start of March for $75.5 million from Aus Finance Group. IWG, the parent company of the Regus and Spaces brands had recently made a large leasing pre-commitment for 40 per cent of the building located at 71 Gipps Street Melbourne. It is scheduled for completion by mid-2021.
Expanding enterprises
Coworking is the biggest movement in office space. Pre-COVID the sector was estimated at more than 20 per cent of the global office leasing market and rising. In Australia, the sector accounted for more than 400 sites in Sydney and Melbourne by mid-2019 – a jump from around just 80 sites only six years prior. (Open-plan coworking comes under the umbrella term of flexible space which is also used to described individual offices rented out on short-term deals instead of longer leases.)
Main players in Australia are now WeWork, Servcorp, Hub Australia, JustCo, Regus, Signature by Regus, HQ and No.18 along with Dexus Place and many smaller operators.
CEO of coworking marketplace Rubberdesk Jim Groves said despite the initial blow of COVID-19 restrictions on the office sector, coworking is expected to be buoyed in future by companies wanting to rent out any excess space, plus a growing number of firms looking for flexible premises both in the coworking and office realms. Rubberdesk which opened in Australia four years ago, is pursuing expansion plans that include branching into Ireland as well as Singapore, despite Asia being one of the hardest hit by coronavirus and work from home restrictions.
At a micro level, the trend is being played out in places like the coastal hub of Manly in Sydney. The seaside suburb, linked to the city’s CBD by harbour ferries as well as other public transport, has seen a tenfold increase in demand for flexible space and satellite offices since the start of the pandemic and the enforcing of lockdowns according to Pine Property’s Patrick Kelleher. Demand has emanated from both individuals and large organisations. “We have been experiencing a large number of enquiries from businesses interested in downsizing or relocating from the Sydney CBD,” Mr Kelleher said.
Commercial property analysts are supporting bullish outlooks for coworking and substantial future uptake of flexible space. UBS real estate and research and strategy Asia Pacific Shaowei Toh, from investment management firm UBS Asset Management is among them. Coronavirus has actually provided a boost for the flexible working sector, he said, and ultimately the industry will “substantially succeed” once the pandemic subsides completely.
“Before this epidemic, working from home or mobile working was arguably more a concept that was ‘good to have,’ but never really implemented in a big way, at least in most of APAC,” Mr Toh said.
Pain then gain
As far as the present is concerned however, recent weeks have seen a significant fall in numbers for many coworking outfits. Among those feeling the pain of WFH movements during COVID-19 restrictions are WeWork Australia and Servcorp. A global provider with a substantial presence in Asia as well as Australia, Servcorp has seen sales plunge this month but at the same time been quick to upgrade its website to cope with a remarkable increase in demand for virtual office services such as phone-answering systems and other styles of communications.
Servcorp’s coworking sales across Australia as well as the UK, Europe and the US fell by up to 40 per cent in May the company’s founder and CEO Alf Moufarrige announced last week, a shift he described as “really dramatic”. Fortunately, the pundits forecast otherwise. As Mr Toh said: “When this COVID-19 outbreak is behind us, we believe many office tenants will review their fixed real estate space requirements, especially if this involuntary experiment with mobile working has resulted in comparable levels of efficiency. In other instances, employees are dispatched to alternative work locations where they can perform the same functions with the aid of technology.”