CBRE to muscle in on co-working industry
CBRE and other big brokers are trying to muscle their way into the crowded but lucrative co-working business, aiming to help landlords create their own flex-space companies that cut out middlemen such as WeWork.
Large companies have embraced co-working and flex space because it allows them to expand and contract their space quickly.
They have been rapidly shunning the 10 and 15-year leases that have been a mainstay of the office space industry for decades.
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While landlords initially welcomed co-working firms as a way to rent spaces and attract start-up firms, many property owners are starting to fear that major tenants could develop loyalties to these intermediaries. That could reduce an owner’s control over who moves in and out of their buildings.
Now, CBRE, the world’s largest commercial real estate services firm, thinks it can get a piece of the action by offering big landlords the same type of services that WeWork and smaller peers such as Knotel and Industrious offer. But CBRE plans to do this through partnerships with landlords that enable them to maintain their relationship with tenants.
The new business set up by CBRE, named Hana, is set to announce its first deal with a landlord. CBRE will create a workspace on three floors of Dallas’s PwC Tower in a venture with Metropolitan Life Insurance, the owner of the tower. The facility is due to open mid-year.
Large companies have embraced co-working and flex space because it allows them to expand and contract their space quickly.
Under the Hana agreements, CBRE and landlords will typically share in the expense of designing and building the space, as well as the profit from operating it.
The traditional deals that WeWork and others have been cutting with landlords have “completely misaligned incentives”, Hana chief executive Andrew Kupiec says.
CBRE declined to say how much it has invested in Hana, but it isn’t shy about its bright prospects. Kupiec says he hopes to have multiple facilities in 25 markets in a “three to four-year period”.
Ventures with landlords aren’t a new idea. WeWork is also expanding its use of landlord partnerships as it gobbles up locations, partly to respond to their fears of becoming detached from tenants.
“In the last three to four months, we’re pushing (the partnership structure) a lot more,” says Granit Gjonbalaj, WeWork’s chief real estate development officer.
Under the Hana agreements, CBRE and landlords will typically share in the expense of designing and building the space, as well as the profit from operating it.
Other brokers are launching efforts in response to the co-working and flex-space trends.
JLL, the second-largest commercial real estate services firm, has made several workplace investments including one in an app firm named HqO.
London-based Savills earlier this month expanded to the US a two-year-old online listing service of companies offering flexible office spaces, named Workthere.
Last year, tenants leased about 7 million square metres of space in these facilities in the US alone, close to triple the volume in 2017. Some analysts are predicting that tenants in flexible office spaces will account for more than 20 per cent of the market in the near future.
Hana was set up as a separate subsidiary of CBRE partly to avoid conflicts with the firm’s traditional brokerage services.
Still, at least one of the new start-ups — Knotel — won’t use CBRE brokers any more to help it find space. “One of my prospects might be choosing between me and a Hana,” said Amol Sarva, Knotel’s chief executive.
The Wall Street Journal
This article originally appeared on www.theaustralian.com.au/property.
