Why the shared office space trend is good news for landlords

A shrewd investor is always on the lookout for trends showing growth. Few corners of the real estate market are on such a strong upward trajectory right now as the arena of shared office space.

Here we take a look at what's driving the trend and consider how commercial landlords can tap into this emerging market.

Hamburg - Why the shared office space trend is good news for landlords

What are coworking spaces all about and why are tenants using them?

Coworking environments see multiple companies and freelancers renting desks and meeting rooms in a shared office space. The benefits are manifold, all stemming from one crucial factor: affordability.

With numerous tenants pooling their resources, smaller companies are able to occupy office space that they couldn't otherwise afford. This creates potential for the inclusion of various luxuries. Consider, for example, the scope for larger leisure areas and grander amenities, such as a gym, cafe and even a climbing wall for staff recreation. These appeal particularly to small, creative companies who are looking to attract the best talent to their ranks.

This broadening of possibilities for new ways of working is proving hugely popular. The number of shared office spaces is projected to increase by more than 20% next year, with the number of worldwide locations swelling to almost 14,000. It's estimated that between 400,000 and 500,000 people are already using co-working spaces in the USA alone.

What's the benefit for landlords?

The most immediate benefit of creating a coworking space for owners of commercial real estate is the increased appeal of and demand for their properties. This, coupled with the sharing of rent between numerous companies, creates the potential for proportionally higher rates.

The financial benefits extend well beyond just raising rent. Inviting multiple tenants into buildings that were previously single occupancy helps landlords with diversification, spreading the risk without the need to expand their portfolio.

How can you embrace the trend?

A smart coworking space business model requires a thorough understanding of the types of client you can expect to attract and what they need from an office.

The affordability and flexibility that comes with a shared office space suggests that you'll be working almost exclusively with small, young companies. PricewaterhouseCoopers estimates that 50% of the workforce will be made up of millennials by 2020, so consider addressing their needs in particular. Social spaces with ample entertainment fare well, though you should speak to individual tenants to understand and address their specific needs and desires.

The needs of businesses change from year to year and only by keeping a finger on the pulse will landlords be able to offer a real estate solution that's in step. This is about more than making money: by adapting in line with cutting-edge companies, commercial landlords can themselves be a part of innovation in creative industries with a coworking space business model. Engel & Völkers' property insights can help landlords get the most from their commercial real estate.

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