The real estate industry is a good reflection of changing times and larger global socio-economic patterns. Evolving consumer preferences in the last decade led to the rise of e-commerce and doorstep delivery services, spurring the growth of the industrial property…
The real estate industry is a good reflection of changing times and larger global socio-economic patterns. Evolving consumer preferences in the last decade led to the rise of e-commerce and doorstep delivery services, spurring the growth of the industrial property market, even as retail declined. Similarly, changing work habits, especially among the millennial workforce, are indicative of a fundamental shift in consumer preference from traditional office spaces to coworking spaces.
In comparison to the traditional office space that requires a two to five-year rental contract, a coworking space gives the tenant a more customized and flexible workspace solution. Coworking spaces or flexible workspaces now form a significant share of the commercial real estate sector and account for one percent of the total office inventory in the market, according to Cushman & Wakefield. These spaces have also reduced vacancy rates across the commercial real estate market by utilizing abandoned or unused properties. Unused buildings are being reconfigured to create coworking sites that can provide startups, remote teams and freelance workers access to a desk and all of the amenities of a flexible workspace. Location is a key factor for tenants – smaller companies that cannot afford real estate in prime commercial locations can rent a small area within a larger coworking space with ease. A study by CBRE found that shared workspaces are a preferred, cost-effective alternative to traditional office leases in costly metro areas in the United States. In addition, the effort required to maintain and manage a stimulating office environment for employees is essentially outsourced. Specialist providers such as WeWork also organise various social events for their members, thus providing formal and informal opportunities for networking and knowledge sharing. In 2017 there were approximately 13,800 coworking spaces worldwide, according to JLL Research, and by 2018 that number had climbed to 37,000.
In fact, the number of tenants using coworking spaces globally has been increasing year on year. The number of coworking members will rise to 3.8 million by 2020 and 5.1 million by 2022, according to Allwork. By combining spatial design with the features of a traditional office space, add-on services and a flexible leasing structure, coworking has disrupted not just the commercial real estate industry, but also the way people work and the expectations that they have from their workplace. In a Colliers survey of Asia’s top 200 occupiers, 56 percent said that they were already using flexible workspaces in some capacity and 91 percent were considering using it. While startups and freelance workers have been early adopters, larger corporations are also seeking out desks for their employees within flexible workspaces. According to Colliers, one of the biggest reasons for multinational corporations to begin considering these spaces are their flexible lease terms and the focus on providing wellness-related amenities to members. Shared workspaces have grown over 200 percent in the past five years and global coworking membership is seeing an average annual growth rate of 24.2 percent. Investors are consequently moving to include flexible workspaces in their portfolio. Cushman & Wakefield’s Coworking and Flexible Office Space report noted that investors are comfortable allocating between 15 to 30 percent of a building or asset to a coworking provider with relatively strong credit. With over four million new businesses registered globally, the demand for coworking spaces is expected to increase substantially in markets worldwide.
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