It’s already a rising phenomena among start-ups and corporations alike in major cities like London, Berlin, and Amsterdam – and now the co-working space bug is hitting Wales, too. Catrin Mackie, a solicitor in our commercial property team explores the trend – and looks at why it can be good for business occupiers and budding owners alike.
What is co-working or shared office space?
Shared office or ‘co-working’ space is on the rise. It’s essentially when a large office block, or – in cities like Amsterdam, quirkier, disused buildings, like old fire stations or warehouses – are converted into office space and rented by lots of different businesses and entrepreneurs. You could rent a desk, a bank of desks, a room, or a whole floor in a building which is shared with other businesses. Providers like WeWork have made this into a successful business model by offering a global network of workspaces that try to foster an environment of creativity, focus, and connection. And in Wales, similar businesses – like IndyCube, which has 34 spaces across the country, Workbench, Llandudno’s The Drum, and Cardiff-based Tramshed Tech are focusing on supporting entrepreneurs with their working environments, too.
What are the benefits for businesses?
Firstly, it’s a much more affordable, flexible, modern way for businesses to manage workspace requirements. It’s a commercial property model that was initially attractive for start-ups – because, if you’re small, you may be less able to afford a lease on traditional ‘office’ building terms, and shared working spaces offer a fun, vibrant opportunity to work alongside and network with other likeminded organisations.
The appeal for start-ups is one of the reasons that shared office space is cropping up in Wales. The Tech scene is booming, and people have come to expect more dynamic ways of working. By offering a collaborative working environment – sometimes with funky factors like ping pong tables, or a communal kitchen – businesses can also attract a generation that have grown up in a changing world of work. The world of rigid 9 – 5, clocking in and out of a drab, multi-storey cellular office building, is on its way out, and approaches like flexible working are taking over. It makes sense, then, that the space people work in is becoming more dynamic and innovative, too.
What does it mean for real estate investors?
It’s not just start-ups that are utilising shared office spaces – bigger corporations are starting to think differently, too. Global companies like PWC are now turning to co-working facilities to create floating spaces for different or regional teams – finding that shared office space come with better deals – and this has a knock-on effect on investment.
Owners and investors in commercial buildings know that empty floors in large buildings are essentially bad for business – they’re a waste of space, and money. Now, by pitting their property as a co-working space, and thinking about that at the development stage, they can maximise its use – and, if they get it right, their rental income.
What are the implications legally?
It’s a different model than the traditional landlord and tenant relationship, and it’s still relatively new. Where one landlord or investor might’ve previously only had one or several tenants in an entire commercial building, they might now find themselves with several hundred. It requires a bit of thinking differently for investors and funders in terms of business and financial planning and making sure that the location and facilities on offer, and the look and feel of the space, is attractive to the particular target occupier market. It is also important to make sure that the various legal documents (particularly with the occupying businesses) are in good shape. This also involves landlords talking to their banks and funders to make sure they’re comfortable with the arrangements, too.
Generally, banks will want to look at what businesses are occupying their landowner customers’ buildings, and the reliability of payments for those occupiers . Multiple smaller occupiers present additional considerations, but it’s certainly not a barrier to investment in co-working spaces.
What about the social implications?
The world of work is changing – and open plan, flexible working environments are more popular than ever before. The commercial property market has to respond to this, or else it’ll become a disrupting factor, rather than a chance for innovation.
Commercial property investors and developers are cottoning on to this new demand, and the changing social scene that’s affecting commercial businesses. The lines of work and play are blurring, and an office that has some of the comforts of home is becoming appealing for more people. More traditional sectors like professional services might be slower to adapt than shiny new start-ups, but they’ll have to eventually – to stay competitive, and to attract the next generation of talent. Thinking about shared office space is one way of staying ahead.