{"id":1004360291,"date":"2019-10-15T04:50:02","date_gmt":"2019-10-15T12:50:02","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004360291"},"modified":"2019-10-15T06:43:28","modified_gmt":"2019-10-15T14:43:28","slug":"coworking-creates-similar-turmoil-across-the-pond","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/coworking-creates-similar-turmoil-across-the-pond\/","title":{"rendered":"Coworking Creates Turmoil Across the Pond"},"content":{"rendered":"
\"\"<\/a>

Fiona Don, Senior Researcher, Avison Young. Image courtesy of Avison Young<\/em><\/p><\/div>\n

While \u201cserviced office<\/em>\u201d providers (or coworking providers, as we call them in the U.S.) are these days perceived as more mainstream than before, \u201csome landlords and investors continue to be relatively cautious with regards to leasing space<\/em>\u201d to them, according to a new report from Avison Young\u2019s U.K. arm. This is especially the case when a lease has not been underwritten by a parent company, with WeWork\u2019s attempted IPO further muddying the waters<\/a>.<\/p>\n

Noting the explosive growth of coworking, the report ties slowing economic growth and an uncertain political climate to \u201ca long-term trend towards shorter leases and greater flexibility<\/em>.\u201d As a result, landlords are finding it harder than ever to lease space that comes into direct competition with serviced offices. For example, the report points to \u201ca clear fall in traditional demand<\/em>\u201d across Central London for office suites smaller than 5,000 square feet, as the coworking sector has grown. The drop was substantial: 60 percent over a 12-month period spanning 2018 and 2019.<\/p>\n

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READ ALSO<\/strong>: Expo Real: Is Coworking for Everyone?<\/a><\/p>\n

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In addition, the report points out that coworking providers typically lease space via a separate Special Purpose Vehicle, which gives the provider more flexibility, but increases the landlord\u2019s risk. Three instances in which Regus dissolved such SPVs are noted. Furthermore, tenant turnover within coworking spaces tends to be \u201cconsiderably higher than on traditional leases<\/em>.\u201d<\/p>\n

The report adds that<\/a> \u201cServiced offices make it harder for investors to raise affordable debt, and over-exposure affects the overall investment value of the building.<\/em>\u201d Avison Young\u2019s research indicates that serviced office\u2013leased investment deals averaged 46 basis points above the prime yield for their respective submarkets.<\/p>\n

The search for solutions<\/h2>\n

Despite all the challenges, the report acknowledges that serviced offices can, among other advantages, comprise an amenity for traditional tenants, by providing overflow space. In a larger sense too, some owners are finding competitive strategies for the coworking onslaught.<\/p>\n

Avison Young suggests that one solution for a landlord might be to enter into a management agreement with a coworking provider and points out that Industrious and Convene are already doing this in the U.K. As in the U.S., the growth of coworking has pushed some landlords to offer fully build-out, \u201cplug and play<\/em>\u201d spaces, which both enables potential tenants to visualize the space and speeds up the move-in process.<\/p>\n

Avison Young\u2019s research also found that \u201cvoid periods<\/em>\u201d can fall drastically, from 6 to 12 months down to just one to three months, with this type of build-out. Furthermore, rent premiums of about 10 percent have been achieved with such space, even as rent-free periods have been cut from, say, nine months, to six months or even just three.<\/p>\n

In a blurring of roles, however, coworking operators such as Knotel and WeWork HQ are offering space with custom build-outs and tenant branding opportunities. In another parallel with the U.S., some landlords in the U.K. are offering their own coworking spaces, such as British Land\u2019s Storey. This even as WeWork and at least a few other U.K. coworking providers are gradually acquiring their own buildings.<\/p>\n

One advantage for building owners, according to the report, is the opportunity to build customer loyalty, which could pay off if a tenant grows to the point that it seeks a traditional lease. The landlord would be \u201cin essence, incubating its own future tenants<\/em>.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

A new report from Avison Young outlines how the rise of flex office space in the U.K. is challenging landlords to find effective strategies in a changing market.<\/p>\n","protected":false},"author":882,"featured_media":1004360294,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21784,21808,16,23891,21742,21747],"tags":[33022,37899,42461,33383,33655,33678],"class_list":["post-1004360291","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-brokerage","category-featured","category-international","category-national","category-latest","category-office","tag-avison-young","tag-convene","tag-coworking","tag-industrious","tag-regus","tag-wework"],"acf":[],"yoast_head":"\nCoworking Creates Turmoil Across the Pond - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/coworking-creates-similar-turmoil-across-the-pond\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Coworking Creates Turmoil Across the Pond\" \/>\n<meta property=\"og:description\" content=\"A new report from Avison Young outlines how the rise of flex office space in the U.K. is challenging landlords to find effective strategies in a changing market.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/coworking-creates-similar-turmoil-across-the-pond\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2019-10-15T12:50:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-10-15T14:43:28+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/10\/coworking-3.-Image-via-Pixabay.com_.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Scott Baltic\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/coworking-creates-similar-turmoil-across-the-pond\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/coworking-creates-similar-turmoil-across-the-pond\/\",\"name\":\"Coworking Creates Turmoil Across the Pond - 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