Landlords to become “biggest competitor” to flexible space operators

The virtual edition of GCUC APAC kicked off last week with a session on real estate. Speakers of the event included Brad Krauskopf from Hub Australia, Ada Wong from Champion REIT, Annie Ricker from Hines, Cathy Hsieh from Swire Properties, and Jonathan Wright from Colliers International.

The event kicked off with a discussion on the impact of flexible space on real estate.

“Everyone is saying that they want flex space in their assets.” – Brad Krauskopf

Below you will find our key takeaways from the event.

There’s a Need for Flex Space

If there ever was a need for flexible space, it’s now.

24 to 36 months ago, landlords were seeing companies willing to sign long leases — but the reality has changed since the onset of the coronavirus pandemic. People are now renegotiating leases and those looking to sign new ones are looking for shorter, more flexible terms.

This is good news for the flexible workspace industry, as it presents a new window of opportunity.

One of which is a potential increase in management agreements.

Management Agreements Could Become the New Norm

The office situation in Hong Kong didn’t really lend itself to management agreements, Ada Wong commented.

“For example one of our buildings has an occupancy rate of 99%; in a building like that, you don’t really need management agreements.”

However, this is likely to change in the near future. Because people are not as willing to sign robust leases now, the idea of a management agreement or joint venture is becoming more appealing to landlords.

According to Annie Ricker, there is another reason why more landlords will turn to management agreements with flexible workspace operators.

“If you consider the traditional rent arbitrage model, landlords have started to see the amount of premiums that coworking space operators are able to achieve. Landlords want an in on that. I would venture to say that the majority of deals going forward will be management agreements, joint ventures, or participation leases.”

Landlords Will Become a Big Competitor

“Our biggest competitors in the future will be landlords.” – Brad Krauskopf

Because landlords are becoming more aware of the premiums that coworking spaces can achieve and because tenants in general are asking for more flexibility, landlords are increasingly more inclined to offer flex space.

While some landlords will be willing to work with existing flexible workspace operators in the form of management agreements or joint ventures, others will be more inclined to create and operate their own flexible workspace brand.

Cecilia Amador de San José, allwork.space