Developers transforming office buildings with co-working
Employment expectations from millennials, increasing job automation and other developments are all changing business operations and workspace requirements.
While office environments have been getting more innovative with LEED Platinum and WELL certified buildings becoming more popular in China, the business of developing office buildings has remained much the same.
The traditional approach that we see in China is for developers to buy land, build a structure and then lease out space by the floor to corporations who fit out and finish their offices after signing leases of three to five years, just as they did in 2007 or 1997.
This model, which is standard globally, may be set to change, however, as more corporate tenants look to flexible office options, such as co-working, to handle some or even all, of their office accommodation needs.
According to JLL’s Future of Work research, building owners and developers must now consider providing their tenants with an environment that supports collaboration, innovation and provides an engaging employee experience.
Employment expectations from millennial team members, increasing job automation and other developments are all changing business operations and workspace requirements. The boom in co-working spaces has been instrumental in providing a productive, creative, and satisfying work atmosphere that allows for community spirit, valuable networking opportunities and fruitful brainstorming sessions.
Five recognized benefits of co-working spaces include:
- Enabling collaboration: by freeing more space for collective working and discussion, co-working environments make it easier for teams to work together.
- Inspiring innovation: by allowing companies to free their workers from working the same way each day, co-working style offices spark new thinking that can solve key business problems.
- Creating flexibility: co-working offices provide flexibility for companies to expand without committing to long-term space costs and also give individuals the opportunity to change the way they work every day.
- Attracting and retaining talent: with the lines between work and personal lives blurring, employees are expecting more fun and flexibility in their workplaces, and companies that can provide this have been shown to gain an edge in recruiting and keeping top notch team members.
- Reducing costs: by doing away with dedicated desks for team members who are often out of the office, co-working and other flexible office strategies leave more room in the budget for building productivity.
The rise of co-working in China allows developers to start looking beyond the traditional office development approach to find new ways to create value from space, from service and from their skills in development and project management. For developers with effective business models and effective management processes, co-working present opportunities to create new revenue streams and appeal to a broader range of clients.
Across Asia and globally developers are closely watching the co-working trend and top developers have already begun taking steps to incorporate flexible office strategies into their business. Here are a few strategies we have seen recently:
Co-working’s rapid growth and its appeal to tenants has led to developers leasing whole or part of buildings to co-working operators. This approach frees the developer from managing leasing of the building and provides flexible office firms with large amounts of space to meet growing demand.
For developers putting together new projects, there are opportunities to create part or all of a building on a build-to-suit basis for co-working operators or individual occupiers that want purpose-built flexible office facilities. This approach can provide occupiers with the benefits of space built with co-working in mind while helping developers defray development risk.
Flexible office approaches are also presenting new opportunities for developers to give new life to older buildings. Many developers are refitting their existing properties into co-working spaces, and investors having been buying up hotels and workshops for conversion into flexible offices. This approach helps developers get commercial office value from buildings with smaller floorplates or other design features that prevent them being leased as traditional grade A office.
Retail developers are also winning in the co-working revolution by turning upper floor spaces and other less-used space into flexible offices. This approach not only brings in new office revenues, but also drives traffic to retailers in the mall during non-peak workdays.
The long-term impact of the co-working wave remains to be seen. However, it is already clear that co-working is no longer perceived as a new age workplace practice, suitable only for start-ups. In fact, more companies of different sizes from various sectors are exploring the option to innovate, tap into entrepreneurial culture and take their organization to the next level. Building owners and developers have to look beyond the traditional value of office buildings to deliver more comprehensive, agile and flexible services to their tenants.