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- Coworking Valuations Are Due For An Update
- Brooklyn Coworking Firm Cuts Space In Half
- Pacific Northwest Region Sees Bump In Leasing Activity
- IWG Takes Over Third WeWork Hong Kong Location
- HSBC To Move Forward With Office Reduction
- Downtown Brooklyn Complex Ushers In New Leases
Coworking Valuations Are Due For An Update
The durability of short-term sublease offices have come into question as uncertainties grow about this business model.
According to Lucas Rotter, CEO of appraisal software firm Valcre, this plays into the valuation model.
“They [appraisers] would view that space as owner-user, which they would apply market rent to,” said Rotter.
However, if a building has a reliable coworking tenant, appraisers view the occupant like any other tenant.
Rotter added that if there is uncertainty of the durability of the income stream, an appraiser could apply different risk characteristics.
With major changes occurring in the office industry at the moment, Rotter believes that there will be a big shift in how coworking companies are appraised too.
“Most of the time, it [coworking space] is being rented at a pretty high price per square foot, but you’ve got a higher vacancy and credit loss that you’re dealing with as well,” said Rotter.
The main factor to look at is whether a coworking tenant can pay rent or not.
“This is the hotelification of office space,” said Rotter. “With hotels, you’ve got a higher cap rate range than you typically do with office space. Specifically, it’s because the one-night leases are causing a higher risk tolerance.”
Brooklyn Coworking Firm Cuts Space In Half
Coworking operator BKLYN Commons has cut down on its space by 50% in Bedford-Stuyvesant, Brooklyn.
The pandemic has forced the five-year-old firm owned by Jack Srour to give up 15,000 of its 30,000 square feet. The 45,000 square foot building is owned by Jack’s father Albert Srour.
The company has also reconfigured its space to accommodate pandemic-era requirements, such as creating new meeting rooms, private offices and open desks.
“Many of our members who downsized their staff, shared that they need less office space at this time to weather the economic storm caused by the pandemic,” said Johanne Brierre, BKLYN Commons head of growth. “We’re offering new options to meet their needs.”
Pacific Northwest Region Sees Bump In Leasing Activity
The Puget Sound region had one of the most active office markets in the U.S. last year despite the overall slowdown in growth.
According to CBRE’s list of the 100 largest leases, Seattle came in at number three with three new leases that totaled 2.2 million square feet, just behind Washington D.C.’s 4.9 million square feet and Manhattan’s 6 million square feet.
The majority of the top two markets’ leases came from renewals, compared to Seattle’s completely new leases.
The Eastside has dominated large leases over the past few years. For instance, only 400,000 square feet was signed for Seattle spaces last year, compared to the 3.7 million square feet in 2017.
2020 marked the third year in a row that demand for new space on the Eastside surpassed Seattle and the surrounding region.
The companies who signed large leases included Amazon, who took up over 1 million square feet at West Main and 967,500 square feet at 555 Tower. The third lease totaled around 232,500 and CBRE notes it was by a separate technology firm.
In fact, of the 100 largest leases this year, the tech industry had the largest share of square footage at 24%.
While activity still remains uncertain, CBRE’s Pacific Northwest Senior Managing Director John R. Miller said that the firm anticipates activity to grow later in the year as vaccines become more widely available.
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IWG Takes Over Third WeWork Hong Kong Location
IWG has taken over another WeWork office, this time in Hong Kong’s Kowloon East district.
The 50,000 square foot location will become an IWG ‘Signature’ flexible office. This marks the third WeWork location IWG has transformed in Hong Kong.
The new Signature at the Quayside location will open in May of this year, joining the other two Hong Kong spaces located in Causeway Bay and Tsim Sha Tsui.
“Up until now, organizations have been taking gradual steps towards hybrid working, but now we are seeing companies of all sizes accelerate this approach as a result of the pandemic,” said Mark Dixon, CEO of IWG.
This shift in workplaces is part of the renewed employee-first approach many companies are taking. Dixon stated that IWG will continue serving the Hong Kong area as demand grows.
The company is expecting a major shift to new workplace styles and methods in the wake of the pandemic. With businesses adopting more remote options, flexible workspaces will play a significant role in how companies operate for the foreseeable future.
HSBC To Move Forward With Office Reduction
HSBC has announced plans to cut back on its office footprint over the next few years as it transitions to a more “agile” and hybrid work model.
The bank said it is aiming to reduce its office space worldwide by 40% in the long term, which does not include its branch network.
Noel Quinn, CEO of HSBC, said that the bank will keep its Canary Wharf headquarters for its 10,000 employees, but its smaller offices around London would most likely close.
“Take London for example — we will have the building here at Canary Wharf, this will be the primary London office, the nature of working in that office will change to have a higher occupancy per square foot because we’ll have a hybrid style of working and we’ll probably release premises elsewhere in London that are coming up for lease renewal over the two to three years,” said Quinn.
The bank is in the midst of a global restructuring program that includes cutting 35,000 of its staff, which will help it reduce its office footprint.
Downtown Brooklyn Complex Ushers In New Leases
Downtown Brooklyn is seeing a spike in office leases at one specific property, the MetroTech Center.
The 5.5 million square foot mixed-use complex has seen a total of 132,000 square foot in lease transactions so far.
This includes a variety of companies including HeartShare Human Service of New York renewing its 32,696 square foot lease, SoulCycle extending its outdoor studio through June and the IRS renewing its 48,000 square foot lease
JLL also signed an 11-year lease to manage coworking space Orchard Workspace. The new workspace will feature UV air purifiers, mobile dividers and a micro market for food and beverages.
Other tenants include Slate, Think! Architecture and Design, Uniworld Group, JPMorgan Chase and several others.
“Despite the pandemic, we continue to see strong leasing activity and interest at MetroTech and throughout the Brookfield commercial and retail portfolio,” said Mark Kostic, SVP of asset management and leasing at Brookfield Properties.
This activity is notable as a Colliers report at the end of 2020 found that neighboring Manhattan’s office leasing activity declined 55% from October and 80% year-over-year.
However, the beginning of this year saw promise, with leasing activity in Manhattan increasing by 18.6% in January, the highest since July 2020.Share this article