Coworking: landlords under more scrutiny than ever

Unprecedented surge in coworking adoption across Germany highlights the ongoing challenges the modern working revolution has brought to bear on the traditional landlords, says Colliers International.

Landlords have never been under such scrutiny. Tenants want more flexibility, increasingly diverse locations, heightened service levels and a culture that puts their business needs at the heart of their real estate choices.

Wolfgang Speer, Head of Office and Occupier Services, Colliers International, Germany, explains: 

“Germany has long been one of the more conservative European markets, yet the last three years has seen an unprecedented surge in coworking spaces throughout the country. Tenants are themselves more under pressure that they have arguably ever been due to changing markets and customers habits evolving thanks to wider trends such as ongoing digitalisation. Property owners are facing ever increasing demands and competition over what they can provide to their tenants, which has led them to evolve their proposition or face being left behind accordingly.

“The large co-working providers found a gap and have successfully, smartly exploited it in Germany. Providing tenants with the flexible space they need to operate, paired with a level of service that one might expect in a hotel has left landlords who are late adopters scrambling to adapt.”

Colliers says investors are increasingly working to be more in tune with their end users, tenants. The traditional relationships between landlords and tenants left some occupiers feeling neglected.

Robert Campkin, EMEA head of corporate capital solutions, Colliers International, explains:

“Development of co-working and flexible office space has put an onus on tailoring specific solutions to each individual tenant. It’s good to see more landlords now considering tenants as customers, heightening their service levels and efforts to accommodate a business’ bespoke requirements.

“Occupiers are in an ongoing war to attract the best talent to their businesses and smart businesses are sweating their building’s capabilities to offer the best experience to their end users, as well as maximise the value they can create from their tenancy and covenant strength.

“Hotel owners and operators succeed when they understand what their guests want. It’s a similar situation with Landlords and tenants with landlords needing to provide the right product both from a physical perspective, but also deal creativity to provide businesses with the right environment to face their own challenges and requirements.”

PMA estimates that serviced office providers accounted for 15% of take-up in the UK in 2018 and 11% in the rest of Europe. This is a phenomenal rise from a sector which just four years ago accounted for less than 1% of the total market. However, this rapid expansion has raised questions over the sustainability of demand as well as concerns over the covenant strength of the operators themselves.

We consider these arguments closer in tomorrow’s edition.

james.wallace@realassetmedia.com