21 June 2018

The Future of Coworking in Brisbane

Kerri Balaba
Kerri Balaba

The commercial real estate landscape of Brisbane is evolving.  The rise of the consultant, the increase in start-ups, and the need for more cost-effective office environments are driving this change.

The big question is – what are the impacts on the traditional commercial real estate sector?

Many of these types of companies are finding themselves looking for flexible or smaller workspaces and options that don’t require as much initial capital as a traditional office.

Add into the mix larger companies looking to expand their existing operations and offer flexibility to their teams, and you have an emerging market of coworking spaces.

While still a relatively new concept in Brisbane, coworking spaces are giving a range of businesses different options to consider when looking at physical spaces.  A typical coworking facility comprises the following business model:

  • Initial establishment and running costs include rent, fit-out costs, building maintenance, personnel, IT systems; and
  • Primary revenue comes from membership fees, meeting room bookings, events and sales from amenities (e.g. on-site cafes).

However, how will these newcomers impact on the real estate market in Brisbane?

Landlords who are having difficulty leasing their large commercial spaces to single businesses may find that they will be in demand from coworking companies.

Coworking companies look to lease entire premises with a view to providing impressive fit-outs, facilities and amenities to attract their members. The current predominant business model of coworking companies is to take out long-term leases and incur some significant initial costs to create the space and services.  They will also seek an incentive period from their landlords to allow them to find members to fill their spaces.”

On the other hand, if these coworking companies are unable to establish a significant membership base both initially and during the course of their long-term lease, it could be extremely detrimental to both the landlord and the tenant.

For these coworking companies as tenants, there is a risk of being unable to recover enough of their initial expenditure and maintain their business model to the point where they are unable to complete or meet the obligations of their long-term lease.

For the landlords of coworking companies, how will their rights be sufficiently protected given the seemingly risky nature of the tenant?  And for those landlords that don’t want to run the risk of having such a tenant, will they find themselves struggling to keep up with market trends and demands?

As coworking spaces are still in their infancy in Brisbane and Australia, the market is yet to be properly tested.

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