Changing worker requirements are driving growth in Perth’s flexible workspace realm.
Jamie Vine knows how crucial it is to get the business model right when it comes to operating flexible workspace.
As chief executive of The Happy Workplace Group – the new parent company of Liberty Flexible Workspaces – it was his call to take on the Perth space that Victory Offices surrendered after going into administration late last year.
Victory Offices was wound up in November following a drawn-out legal dispute between the company and its creditors.
At its ASX listing in 2019, Victory was valued at $80 million and operated in 21 locations across Australia, including 1,100 square metres of space in Perth’s Exchange Tower.
“We took over with 36 hours’ notice in the end,” Mr Vine told Business News.
“We’d been talking for a while as a backup plan for Victory, but we took over quickly, and because of the nature of Victory’s demise, some clients had already started to leave because they were nervous.
“When I walked in, one of the largest clients was packing boxes, and I ended up on a conference call with somebody in Hong Kong and they decided to stay, once they knew they could.”
The move positioned Liberty Flexible Workspaces as the largest supplier of flexible workspace in Western Australia, second to global operator WeWork.
Liberty Flexible Workspaces' 197 St Georges Terrace offices.
Liberty has more than 8,000sqm of space across Perth, West Perth, Burswood and Joondalup, and Mr Vine said keeping a close eye on margins was key to survival.
“This industry is a high-fixed-cost business, so you’re entirely reliant on achieving occupancy at a sustainable rate,” he said.
“There was a lot of wasted space and therefore wasted opportunity,” he said.
“The biggest cost of establishing one of these ventures is building it [the office space]; turning a vacant floor into this kind of facility is an expensive exercise … but only having to upgrade it and adapt it is much cheaper.”
Liberty has an additional 1,800 square metres in its Perth CBD pipeline, which industry sources say comprises a floor of GDI Property Group’s Westralia Square 2 development.
A recent CBRE report showed that flexible workspace accounted for less than 3 per cent of Australia’s office space, compared with the Asian Pacific average of 4.4 per cent and 7 per cent in London.
Research by JLL showed the global flexible workspace market was expected to grow to 30 per cent of all office space by 2030.
JLL found that the impact of COVID had not only dramatically changed the global real estate market but had accelerated existing flexible trends.
International Workplace Group, which operates 3,500 flexible work centres globally under 13 brands, is among the groups poised to capitalise on this growth.
IWG currently operates 6,500sqm of flexible workspace in and around Perth via its Regus and Spaces brands, and is set to add 1,100sqm via a new Nedlands facility in May.
The company plans to commit a further 3,326sqm to its WA books, including three suburban developments and one in the CBD, in the first half of 2023.
This forms part of IWG’s aim to identify a further 12 sites for its WA portfolio this year.
IWG country manager Australia and sales vice-president Australia and NZ, Damien Sheehan, told Business News the company’s focus on suburban markets reflected a trend identified during COVID.
“In Perth, people became a lot closer to their communities during the pandemic, got to know their local coffee shop, creche or restaurants better, and it became a real community feel,” Mr Sheehan said.
“That’s fanning the flame around this live, work, play closer to home [idea].
“Our goal is to eventually have a centre that’s within 15 minutes of 80 per cent of the Australian population ... that’s what’s driving us.”
International Workplace Group's Spaces flexible workspace in Raine Square.
He said the suburban hubs would often serve to provide for businesses seeking to adopt hybrid working arrangements.
“We’re under no illusions, we’re not saying that everyone will want to work 15 minutes from home, because it’s unrealistic; employers still expect to see their teams,” Mr Sheehan said.
“Some of the time you’re at home, some of the times you’re in your central headquarters, and the rest of the time it’s working near home, potentially using the flex sector.”
Mr Vine explained that Liberty’s Joondalup office operated in this way, catering to people looking for a middle ground between working from home and the city.
“There are lots of people who live in that northern corridor who don’t want to work from home but don’t want to come to the city, so that’s suiting them,” he said.
Mr Vine told Business News more landlords had included flexible workspace in their portfolio in recent years as workers’ preferences changed.
“We’ve certainly seen the acceptance of a flexible workspace forming part of the real estate portfolio for a corporate occupier has become mainstream,” he said.
“The biggest thing we’re finding is that when landlords are trying to entice significant tenants to their buildings, those tenants are demanding there be a flex solution in the building.
“Large corporate occupiers are telling landlords, ‘You must provide this, this and this or we will look elsewhere’.”
Mr Vine recently launched a new business arm, Felix Real Estate, to meet the needs of tenants looking to move out of Liberty’s space to take up more mainstream leases.
The first of its kind in WA, he said the company would play a similar role to a tenant representative, facilitating connections between occupiers and landlords.
Perth-based Spacecubed opened a hub in Parramatta in Sydney’s west in late 2022 and is set to launch an Adelaide hub within weeks, while maintaining its 7,100sqm WA portfolio.
Spacecubed has opened a flexible workspace in Parramatta as part of its national expansion.
Founder and managing director Brodie McCulloch said the company had broadened its reach post COVID.
“We have looked for a national network approach to creating space, because now people are travelling again, that’s back on the cards,” he said.
Mr McCulloch said tenants were demanding more collaborative workspaces than before the pandemic.
“We are adapting our spaces to be able to support those more flexible teams … people are wanting to work together when they are in the space rather than just sit there with headphones on,” he said.
Spacecubed is also set to run the planned Neerabup Australian Automation and Robotics Precinct and is expected to announce a new event hub next month.
The business is also in talks with landlords in Queensland and Victoria to run flexible workspace in those markets.