The Rise of Co-working Space

Once viewed as a micro-trend, co-working space is now an established sector in the real estate industry which doubled in size last year 1. In Auckland alone, the growth went from 1400 square metres of space in 2011 to 13 operators running 13,800 square metres in 2016 and then to 28,000 square metres of space by August 2017.

This sprouting of spaces is not confined to our largest city. There are 40 co-working spaces throughout New Zealand and research forecasts this will grow by 20 per cent this year2.

By the end of 2017 there were estimated to be one million people around the world working in co-working spaces. This once-considered micro-trend is not going anywhere fast and is now becoming a key part of the real estate strategy of tenants, property owners and investors alike.

There are a huge number of contributing factors in the rise of the co-working space.

• The rise of Millennials entering the workforce who want to work in a more flexible and transient way but remain connected to a meaningful community;
• changes in the way people work thanks to technology;
• the large SME sector who don’t want to commit to a ten-year lease with a landlord;
• the increasing number of those who work in a freelance or contractor capacity - which is expected to outnumber fixed employees by 2020 in the US3
• a desire for increased collaboration and community-feel work environments.

Co-founder of Innov8HQ, a successful business hub and collaborative workspace in the heart of Dunedin’s warehouse precinct, Heidi Renata, believes the rise of co-working is due to the fundamental loss of face to face conversation which leads to a breakdown of community, thanks to technology.

“Where technology has connected us, it has potential to divide us,” explains Heidi.

“The tech boom is transforming our daily lives, being device-centric has meant we have also had to adapt to how we communicate and engage. The unintended consequence is reduced time interacting face to face and increased miscommunication via text/email. Our natural social behaviours are diminished and business conversation becomes human to machine to human.

“At Innov8HQ we have deliberately developed the space and layout to reflect marae protocol and encourage the language of hospitality, respect and creativity,” says Heidi.

While there’s power in connection and collaboration, there’s also power in numbers. Research by Ministry of Business, Innovation and Employment has shown businesses with less than six full-time employees (FTEs) are 57% less likely to succeed after five years.

“In a co-working environment you can tap into the skills and knowledge around you and mimic the scale of your business, without having the immediate investment and commitment of additional full-time employees,” says Heidi.

There are other theories on co-working however. Huffington Post recently quoted the 2020 Intuit report on the Future of Small Business. The report said; ‘we imagine a world where companies motivate and manage employees who never set foot in their corporate office.’4

While flexible working, technology, and the globalisation of workforces is behind this philosophy, the rise of the co-working space diametrically opposes this view. What’s not debated is that technology, the human-need to make connections, and flexible working are changing the property needs of commercial tenants.

On a corporate scale, larger tenants are taking the lead from co-working environments and are reducing their floor spaces and the number of desks and are offering hot desking to cater for flexible workers or ‘Homers and Roamers’ as Heidi likes to call them, and emulating the collaborative and interactive spaces provided by co-working hubs.

This is also dictating the way office space is designed and fitted out.

“Providing open plan areas in an office and deliberately curating a place where people are more likely to connect, talk and collaborate is key to the new business office large or small,” says Heidi.

“It’s the key reason we located the kitchen at the front door of Innov8HQ. Immediately upon arrival guests feel at ease, as if they are in a café, and find it easier to strike a conversation,” she says.

On the SME scale it’s all about connection, collaboration, running an efficient operation and community. Ninety-seven per cent of businesses in NZ can be qualified as small to medium-sized enterprises (under 20 employees)5. This coupled with New Zealand’s flourishing start-up sector, means landlords and property owners are having to think differently about how they attract and retain tenants in this changing environment as well as continuing to get the most value out of their properties.

PMG is looking at various opportunities currently to work with existing tenants, local councils, and co-working operators to ensure its assets are not only fit for purpose in this new way of working, but also extract maximum value out of client’s investments.

Read this article and other stories from the country's leading investment and commercial minds in our free 24-page 2018 Commercial Property ThinkBook.

¹ https://www.nzherald.co.nz/pro...
² http://www.colliers.co.nz/flex...
³ https://tech.co/freelancers-do...
⁴ http://http-download.intuit.co...
⁵ http://www.mbie.govt.nz/info-s...