Landlords benefit greatly from coworking space trend

Major landlords in the country have either setup their own brands or invested in a coworking operator despite leasing risks and probable lower valuations these buildings may bring.

With the unprecedented growth of Singapore’s coworking space, landlords are becoming one of the main beneficiaries of the trending flexible workspace, reported Singapore Business Review.

According to CBRE, major landlords in the country have either setup their own brands or invested in a coworking operator despite leasing risks and probable lower valuations these buildings may bring.

Building owners recently have had to react to changing market trends as real estate has begun to shift from a transactional business model and go towards a hospitality and service business.

“As the shape of occupier demand continues to shift, building owners must react and, as part of this, will have to decide whether to self-perform flexible workspace and amenity spaces, or; acquire, invest in or partner with an operator,” said Jonathan Wright, Colliers International Flexible Workspaces Services director for Asia.

The normalisation of coworking brands has also contributed to the addition of flexible spaces to a landlord’s portfolio.

Along with a healthy financial status, their market share and position in the market is positioned to expand notably.

In fact, Csuites by Lendlease located at Paya Lebar Quarter occupies 72,000 sq ft, while Guoco Midtown will use up to 15 percent of its 650,000 sq ft of their net leasable area for adaptable and flexible spaces.

“It is likely that the flexible office market will be dominated by landlords and a small handful of land private operators in time to come,” said Desmond Sim, CBRE Southeast Asia head of research.

According to Colliers, market dynamics in the country have allowed landlords to add such operators into their asset mix, which encouraged the shift towards amenitisation in Singapore ahead of other Asian markets.

“Operators must view building owners as strategic partners in order to unlock growth and guard against becoming disrupted themselves,” Wright said.

CBRE noted that with the coworking market growth, the percentage allocation for flexible office spaces has increased to around 10-15 percent. This contrasts with the industry average of less than six percent.

Source: 12 Jul 2019, CommercialGuru