Co-working operators under pressure as demand falls ‘off a cliff’
Co-working office operators say they are the latest sector to experience demand falling “off a cliff”, as more parts of the country shut down because of the coronavirus.
Many say the market may need a long time to recover but they remain confident the underlying model, once earmarked as the saviour of the sector, can still serve the function of meeting demand in the broader office space over the long term.
Experts have warned that the main issue for the sector is that operators have short tenancies but must still honour long-term leases.
Hub Australia chief property officer John Preece said based on Australia’s working population “we are trading at half the level to what we would normally expect”.
“These are unchartered waters but we have seen a fall in requirements for dedicated desks and the accompanying hospitality services,” Mr Preece said.
“While we expect sales to come back, while people are quarantined and working from home we have scaled back staff with the decline in business.”
Mr Preece said once normality returns “I suspect people will want to congregate again after weeks or months of being isolated at home”.
One of the largest locally listed co-working groups, Servcorp, recently reported up to a 40 per cent decline in sales.
Founder and chief executive Alf Moufarrige said the company’s co-working sales across the UK, Europe, US and Australia had fallen by between 30 per cent and 40 per cent in the three weeks prior, as the coronavirus outbreak spread.
Since the outbreak of the pandemic, as much as 50 per cent has been wiped off ServCorp’s share price, while ASX-listed peer Victory Offices has lost about 20 per cent of its value.
The issue for operators is that they have to pay rent on a space, while their clients can hire it for anything from an hour to six months under a general hire contract.
An office landlord, which recently leased co-working space but who declined to be named, said “it’s not a place where people wish to be”.
“Obviously with self isolation, being in an office with other people is not advisable and that will hit the sector hard,” the landlord said.
“Many co-working businesses and operators have undertaken fast and wide expansion plans but they may start hurting as they have no clients, yet long leases to pay.”
It comes as JLL said, in a far-reaching paper on the impact of the coronavirus, the crisis will probably accelerate investment in collaborative technologies and the adoption of remote working practices over the long term.
“We are experiencing the largest test of working from home in history and this evolution of working practice will test organisations processes, policies and practices,” the report said.
“Some organisations will find that their business continuity plans are less robust and will attempt to evolve these policies as the pandemic progresses.”