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Today, you can find them in every large German city: so-called co-working spaces that can be rented flexibly by anyone. Internet connectivity, printers, office supplies and networking events included. A desk for a month, a meeting room for an hour or an office for two, three weeks. A variety of different models is conceivable. In the co-working space – usually designed in an open and stylish fashion – lawyers meet graphic designers, and software developers meet start-up entrepreneurs. The idea: everyone benefits from each other, sometimes by just having a chat and sometimes by carrying out joint projects.
47%
of a typical working day is spent at the desk , according to US data.
Co-working: a global trend
Not only start-ups are convinced by co-working solutions, even large corporations are increasingly interested in the new ways of working – not without consequences: the demand for flexibly designed workplaces is rising massively around the globe. Take London for example: co-working spaces already account for around ten percent of leased offices space in London.[1] But what are the drivers behind the co-working phenomenon? One is technological progress, for example, which has also changed the world of working. Using notebooks and smart phones puts anyone in a position to work from anywhere. Compared to working from home, co-working solutions add the crucial benefit of social contacts. And Generation Y, with their strong focus on flexibility and independence in the workplace, also contributes to the increasing demand for co-working services.
Flexible spaces
Co-working is one outcome of agile working concepts. Agility releases creativity, accelerates processes, increases efficiency – and this pays off. According to an analysis carried out by the consulting firm BCG, companies embracing these concepts generate up to five times higher margins than their competitors.[2] “Agile office space”[3] differs from the standardised open-plan office with some individual rooms thrown in for management staff. While open-plan offices are also still needed in the work environment 4.0, of course, they are gradually complemented by flexible communal areas and extra amenities such as a company gym. Fact is: The new trend presents various groups – companies, tenants, lessors and investors – with a series of new challenges, while also opening up opportunities.
Leisure opportunities beat company parking
Talking about flexibility: the transformation of work concepts is also reflected in the registered take-up of the large German office centres. “While the registered take-up decreased by an average of seven percent in 2018 compared to the previous year, lessors of flexible workspaces achieved an increase of 20 percent,” the real estate consulting firm Cushman Wakefield reports.[4] A trend that is closely observed by managers of open real estate funds, who are trying to capitalise on these developments for their fund portfolios. “When we look for new properties, we focus on flexible floor plans. They are key to adaptability,” explains Anke Weinreich, fund manager of grundbesitz europa. Today, young talents are more interested in leisure opportunities than in a company car park. “The location, the connection to public transport and leisure facilities in the immediate vicinity of your workplace are more important than ever. This is the real change in the world of work,” Weinreich adds.
What is the current trend in the world of office real estate?
Anke Weinreich: The idea behind it could be summarised as bike spaces and showers instead of car parking facilities. Sustainability is also becoming increasingly important in the field of real estate. And the look of our offices is also changing: today’s modern offices are more like the living room at home than a sterile open-plan office – and the feel-good character is included. This requires lessors and investors to rethink: rental concepts and terms must become more flexible. And creativity is needed.
One reason why co-working models are currently booming. Where is the catch?
Usually, co-working providers add co-working spaces to existing rental concepts or mix the two. This is a positive development in our view. We are more cautious when it comes to pure co-working properties. The reason why: these concepts have not yet been consolidated and established. If the co-working concept takes up more than 50 percent of the rental space, investors currently tend to apply a risk discount.
Is this related to the fact that rental income is more difficult to calculate because of shorter contract terms?
Whether shorter contract terms are an advantage or a disadvantage depends on the rent level in relation to the market. We attach great importance to the potential of alternative use of the rental space. This means: it should be possible without much effort to rent out space that becomes available to other tenants.
Where are the best opportunities in your view?
We see strong demand in many segments of the real estate market at the moment. We see the biggest potential in up-and-coming locations – especially in mixed-use locations with apartments, offices, entertainment and local shopping facilities, which score particularly highly with millennials.
