Real estate giant JLL estimates that up to 30% of corporate real estate could be flexible workspace by 2030, adding $1.8 billion to the country’s economy.

The industry is estimated to be growing by 25% each year and a recent JLL workplace survey shows 65% of businesses globally see co-working space as a way to reduce capital and operating expenses.

Co-working spaces operate differently to traditional office lease models. Individuals and companies typically join co-working spaces as members, paying a fixed monthly fee depending on the number of desks they require. There are no hidden costs or long leases.

This type of space is being used by startups as well as large corporates and is a chance for investors and landlords with small commercial buildings to turn a profit from empty space without having to set up costly long-term leases.

First Off The Rank

Sharedspace.co.nz founder and owner Matt Knight says there has been a surge of demand in the past year from landlords wanting to know how coworking space operates and what is involved in setting it up.

He started a co-working space in 2010 in a partnership with property developer Andrew Krukziener in one of Krukziener’s office buildings on the corner of Auckland’s Customs and Commerce streets, when the concept was barely known.

He leased 500m2 on one floor and installed 50 desks for technology and creative businesses. Krukziener came to the party on the fitout. A few months of free space for a couple of businesses soon attracted other companies and after six months Knight was operating his co-working space at 90% occupancy. Full-time members of the co-working space paid $750 + GST a month and part-time members using the facility for two days a week $249 + GST monthly for their desks, power, water, use of meeting rooms, tea and coffee and cleaning.

Knight says the space was fitted out to a high specification. The furniture was one of the biggest costs. He was choosy about membership as he only wanted technology and creative businesses – to pull together a community that could feed off one another and create a strong culture for business referrals.

“During that time a number of businesses became too big – eight staff or more – and we were able to place them into other parts of the building. Essentially we became an incubator for empty space at the property.”

Doing It Themselves

Knight says he has had an influx of landlords open to partnering on a revenue share model with a co-working space operator and many are just doing it themselves.

The city fringe has been a popular area for this type of business, whereas the demand is not as strong as it once was in the CBD.

“If a small commercial building owner understands co-working space and gets the offering right, it is an easy way to increase the property’s yield,” he says

“My recommendation to landlords is they gain an understanding of their floorplates and use them to their best potential to allow for co-working without having to put up too many new walls.”

These days he would not look at anything less than 800m2 for co-working space.

“You can make money from smaller spaces but often it is not worthwhile.”

According to Knight curation is the key to good co-working space.

“Businesses curating the types of tenants they want are those that end up doing better. People want to be in a space where they rub shoulders with others who speak the same language.”

Generating Members

Operating at the premium end of the co-working space market is Precinct Properties-owned Generator.

It operates co-working spaces in its own A-grade buildings as well as leased floors in other premium properties in Auckland and Wellington.

More than 1,500 individuals and 200 companies have signed up to Generator’s membership. Across its co-working floors it has a ratio of one member to every 9-12m2. There are different types of configurations from one desk to offices that can, for example, accommodate 12 people but on any one day there might only be eight to 10 people there. Other businesses use hot desks and may have 30 staff but only 20 desks, so people work in rotation.

Generator general manager John Moffett says many firms don’t want the outlay of capital expenditure on an office, and construction is expensive.

“They can sign a 12-month membership rather than a six to nine-year lease. Because it is not a lease it is not a liability on the balance sheet. It is a big saving and they can grow within Generator or shrink back if times are tough.”

Knight says instead of a company with 30 staff leasing 300m2 they can move staff into co-working space and immediately they have cut their rent by half.

Small building investors and landlords need to consider the location of their premises, the amenities and services offered, says Moffett.

“The location has to be where people want to be.”

He says it is one thing to have space, another thing to run it, keep members happy while giving them the amenity and service that is required.

“Anybody can chop up an office into co-working space but it is how they make it work as a community that matters.”

Luxury End

Generator’s spaces have luxury furniture, stunning views and full IT services to every desk, meeting room and event space. Moffett says the furniture tends toward high-end residential to make the co-working space feel more homely and less like an office.

Among its services are a concierge, executive chef, a barista, cocktail bar plus attached event spaces.

“Even if a landlord is doing a turnkey operation, the IT side is often not included as it is a big cost.”

Charges at Generator’s end of the market start at $249 + GST a month for the use of a hot desk one day a week and go up to more than $1,000 a month for corporates.

Outside of that Generator has managed suites where it sets out an office, fits it out and a management service fee is paid by the business using the suite.

While Generator does return a profit to Precinct Properties, Moffett says Generator’s value lies in incubating small businesses up to a size that after a few years they might want to go into a standard lease in one of Precinct’s premium buildings.