The Rise Of The Shared Workspace
There is little doubt that the rise of the “Internet of Things” has led to the rise of the shared workspace.
The old model of how business conduct their everyday activities is changing. Smart devices, and the fact many companies leverage overseas contractors is leading to the “business office”being gradually phased out.
Just 3 years ago, 1 in 12 Australians worked from their homes. That figure is much higher today (about 1 in 3 work from home) as companies opt to downsize their overheads and more people get the “entrepreneurial itch
With so many start-ups, particularly in technology, popping up each week, an office is an expense many new businesses do not need or want, so shared workspaces, hot desks and serviced business environments are appearing almost as quickly as the start-ups that use them.
WeWork, is one of these shared office spaces, and is one of the fastest growing companies in that space. Based in New York, it has capitalized on the changing landscape of businesses downsizing their own office space and has seen significant growth since it was founded in 2010.
Their aggressive growth (as of 2016 they’re valued at $16 Billion USD) has seen WeWork expand into Australia; They’ve just opened two more shared office locations in Sydney’s CBD. This puts their total space on Australian soil to 23,000 square metres and this is expected to increase. Globally, it has more than 650,000 square metres of space and is presently in 100 cities and 30 countries around the world
WeWork, is often secretive about its new office locations until they are officially confirmed, and rumours are circulating that negotiations are underway to occupy space at Barangaroo and at Charter Hall Group’s new 333 George Street location
Sydney’s increasing rental prices combined with the drop in office vacancies to 5.6 percent has no doubt been a factor in WeWork’s decision to open up offices in Australia’s most expensive city. They perceive there is a place for them as rental prices continue to skyrocket
The business model is simple, if not innovative. WeWork are a facilitator of short-term office space for micro and small businesses that need office space for a brief period of time. WeWork rents office space in bulk and leases that space out to those who need it.
The lack of long-term commitments comes with a premium price, but the flexibility of such an arrangement ensures that WeWork is growing extraordinarily fast – business owners are happy to pay the premium costs, which still works out cheaper than renting an entire office building or floor.
The reason this sort of a model is becoming so successful, and more pervasive, is that it ties together several key aspects of what makes a business profitable. It promotes a community-based environment where employees can interact with others, not just within their own organization, but others too. It also consolidates a lot of the unnecessary overheads that traditional companies would typically be paying for, such as internet costs, general amenities and server costs.
Increased internet speeds, The Cloud and rise of smart devices has all but removed the need to have onsite servers, even for companies with thousands of employees.
In an interview with the Australian Financial Review earlier this year, Miguel McKelvey, one of WeWork’s founders and now chief creative officer, described the vibe at its offices globally as a “fundamental openness to other people”.
The company only confirmed its first two office locations in Sydney in May. One is the former “money box” building at 5 Martin Place, where it has about 3260 sq m, or about 500 desks. It will be followed by Pyrmont, where the company has agreed to lease 9000 sq m, or 1800 desks in the refurbished heritage building at 100 Harris Street.
The rate at which Sydney’s offices are being vacated bodes well for companies like WeWork because the city is created the demand through an odd form of “natural selection” where only the extremely wealthy companies can justify the monetary obligations of being based in Sydney.
The younger generation, is far more nimble, impatient and completely nonplussed by the “status” of having a large office space to accompany their new business ventures. Debt is still debt after all, whether you’re a multi-billion-dollar enterprise like WeWork, or a startup using WeWork’s facilities to help move things along.
It is understood WeWork has signed heads of agreement for more than 3000 sq m at 333 George Street over five floors. If it proceeds, the deal would be another coup for Charter Hall, who has agreed to terms for more than 90 per cent of the building ahead of completion.
The second location under negotiation is International House Sydney, or C2, at Lendlease’s Barangaroo South project, which will be the first commercial complex in Australia made completely from timber – using engineered cross-laminated timber (CLT) and glulam (glue laminated timber).
The six-storey building will comprise about 7000 sq m.
When all is said and done, these two developments will introduce almost 2,500 “desks” into the Sydney CDB. For sole traders, online retailers, micro businesses and companies whose workers do not necessarily need to be “onsite”, one would expect these desks to be leased quicker than you can say “entrepreneur”