What Traditional Landlords Could Learn From Co-Working, From Two Of Dublin's Biggest

The rise of the co-working model has sent ripples through the global property market over the last 12 months. 

According to research from Cushman & Wakefield the sector accounted for 8% of office takeup in 2017 in Dublin.

At Bisnow’s first Dublin State of the Market event, two of Dublin’s biggest landlords spoke about the effect it has had on their business and how parts of the co-working model can be implemented to benefit traditional office space.

“I think like in all markets it’s good to have diversity," IPUT CEO Neil Gaffney said. "Traditionally we’d expect the serviced office market to look after occupiers of less than 5K SF and curiously in Dublin of late we’ve seen them pick up major corporate occupiers with large takes of 50K to 60K SF. I think it’s picking up the bottleneck in the demand and supply equation that we’ve seen.”

According to Gaffney the co-working model does have a role in the medium term, rather then just benefitting from the current high levels of demand for office space.

“We look at every multi-let building we own as an opportunity for flexible working,” he said.

Hibernia REIT CEO Kevin Nowlan said co-working is here to stay in the office market, but it has limitations. 

“We think it’s going to get bigger, but it’s constrained in its growth," he said. "I think landlords are only going to be able to accept a certain amount in their portfolio in that use and that’s down to the inherent nature of the short-term leasing profiles of the companies they work with and the covenant strength.”

However, Nolan said there are great advantages to co-working companies, something that Hibernia is trying to replicate itself in Windmill Lane.

“Co-working is like a service that big corporations need within the confines of where their companies are, because it gives them great scope to take on additional projects without taking on longer-term commitments," he said.

Nolan also sees added cultural benefits of co-working spaces in traditional offices.

“Co-working brings a lot of vitality and buzz to an area and that comes from the higher density of people," Nowlan said.

Hibernia is trying to recreate that feeling and culture in what it described as ‘clusters’.

“What we’re trying to do is create an estate or cluster buildings really targeted at multi-let, or tenants that want to do 10K or 20K SF and we feel what these tenants are looking for is similar to tech company offerings,” like well-being, communal spaces and food and beverage facilities.

“So, co-working will be a big part of those clusters," he added.

Nowlan also believes that co-working areas could be an opportunity for landlords to get to know smaller companies that one day could become bigger occupiers. 

“If you can develop relationships with them when they’re 2K or 3K SF hopefully you’ll develop relationships with them when they’re 100K SF,” he said.

Both Gaffney and Nowlan agree that co-working, while it adds diversity to market and has some great benefits which can be replicated in traditional office spaces, does not have much scope to grow beyond 10% to 15% of the market.

Despite their confidence about the co-working model's limitations, it cannot be denied that it is growing rapidly, from 0.7% of total takeup in Dublin in 2016 to 7.9% in 2017. Last year the equivalent figure was 21%. The trend has a long way to go, and there are lot of things landlords can learn from it.