I had the honour of being on the panel for Bayleys ‘Future of Coworking’ industry event in July alongside panel members from CollabNZ and Generator. There were good questions asked and equally as good insights and answers that focused on the future of coworking in Auckland, and in particular, what that meant for commercial landlords.
“Many landlords are waiting for the coworking wave to hit shore, but in reality, that wave crashed on shore long ago…”
Coworking is a new sub-sector of the real estate market. Correct. Coworking is an emerging trend. Hmm...not quite, but it’s a common assumption I’ve heard from numerous commercial landlords. Many landlords are waiting for the coworking wave to hit shore, but in reality, that wave crashed on shore long ago, and it’s already brewing a rip out at sea, just waiting for that next wave.
Considering the fact that 40% of the global workforce are freelance, or that (at current growth rates) 67,800 coworking spaces are could be open by 2021, and that the current coworking global revenue is at nearly $5 billion per annum…it’s safe to say that coworking has become a well-established and in-demand product category, with the market dynamics to prove it.
Coworking has become a core strategy, not only for a bunch of small startups but for numerous blue chip companies. That’s because coworking fosters a genuine sense of community and synergetic relationships. A recent report by Bayleys, stated that some coworking operators reported that up to 40% of their members were cross-pollinating their services and growing revenue streams through their fellow members. And for the landlords? Having a coworking operation in your building brings new energy, life and interest, as well as additional amenity which adds value to other tenants too.
“40% of [coworking] members were cross-pollinating their services and growing revenue streams through their fellow members.”
As a coworking provider we know the opportunities and benefits are immense; however, the current commercial leasing model restricts coworking operators from achieving optimal success. Quite frankly, the leasing model is broken.
At the event, a reference was made to Airbnb and Uber being akin to coworking. I refuted. Companies like Airbnb and Uber don’t have to lease the apartment or the car and then furnish or maintain it. Unlike those companies, coworking companies have to fund the lease, the fit out and the infrastructure as well as focusing on the human piece of the puzzle - and that’s the key piece that makes coworking so appealing, because “it’s not about desks it's about community.”
As coworking operators, if the only option we have is to pay all the traditional costs, then the truly competent operators will be forced to focus on a very small footprint meaning they can’t scale, which by default, impacts on their commercial viability and the true value they bring in curating a community goes undelivered and we get soulless spaces that are unable to deliver the coworking promise of collaboration.
“...landlords need to see coworking operations as a way of adding more value to their assets.”
In saying that, my advice is that landlords need to see coworking operations as a way of adding more value to their assets. The key to finding that value is through the relationship between the operator and the landlord. Landlords need to understand that coworking operators aren’t your average tenant. We’re high-traffic environments meaning we bring in a vibrancy like no other. Like any successful relationship, it’s a two-way street - landlords need to understand the operator’s need for flexibility when it comes to terms and fit outs, but by return, we can help them achieve a much higher return over a traditional lease.
So, landlords be prepared, because coworking is not your typical leasing model. It’s people intensive and requires a level of engagement that few coworking operators have mastered. It's more than cool furniture and colourful spaces - those things are simply a baseline expectation. To create a community, you need seasoned professionals who know how to curate the right environment and culture of collaboration, and that’s something that only comes from years of learning.
We believe the future of coworking in New Zealand will see an increasing number of landlords adopting more flexible leasing models in order to meet the needs of a changing workforce and keep up with the industry as it evolves. Of course, there are always going to be some landlords that choose to compete and provide their own solutions; however we caution landlords on this front to really do their homework.
Either way - it’s safe to say that coworking is no longer a new ‘trend’. Coworking is a product category in its own right, in the same way that ‘restaurants’ is a category. When it comes to restaurant cuisine, you’ve got Chinese, Italian, French, Japanese etc. One isn’t necessarily better than the other, it’s just different, and by the same token, not all coworking providers are the same.
One thing is for certain though - coworking is changing the way landlords are doing business, and those landlords, who choose adapt their business practices to better suit the needs of coworking operators, and provide occupants with more flexibility; those will be the landlords who succeed in the long-term.
BizDojo is New Zealand's first coworking operator having started in 2009 we were one of the first 100 coworking spaces in the world. We are now New Zealand's largest and only national coworking operator with 7,200m2 of space across Auckland, Wellington, and Christchurch.
Special thanks to Bayleys for hosting, and to my panel-mates from CollabNZ andGenerator for their great insights into the future of coworking.