The co-working trend has reached Central and Eastern Europe and the sector is likely to grow exponentially in the next few years, panellists agreed at Real Asset Media’s CEE Outlook Investment Briefing, which took place in Budapest at the end of February.
The sector is still in its infancy but has huge potential to grow, said Hubert Abt, CEO, New Work Offices: ‘Flexible office solutions have a market share of 3, max 4% in CEE capitals, which will go up to 12% and keep growing. We are still a long way from London, which has a 15% market share which will reach 30% in the next five years’.
Its main drivers, in CEE as elsewhere, are flexibility and services, said Abt: ‘We are talking about hospitality, looking after clients, and availability, the ability to move in 24 hours, allowing flexibility and optimising the leasing process, all things which the traditional office sector is not known for’.
According to Colliers International research, as of February 2019 there were 60 pure co-working centres in Warsaw, 30 in Budapest, 25 in Sofia, 13 in Bratislava and 12 in Bucharest. They represent less than 1% of office stock so they are a small sector, but one that is growing very fast.
The world’s biggest operator, WeWork, has chosen Warsaw as its first and so far only outpost in the region and already has a significant presence. It has 2 operating centres in the Polish capital with another 8 planned and has so far leased 40,000 m2. Many believe that Budapest, where the office sector is so strong, will be their next target.
Banks are also coming on board. ‘Flexible working is here to stay and it is a good solution,’ said Gábor Pető, Head of Real Estate Finance, UniCredit. ‘When financing a project I do not judge the co-working tenant any differently to a normal tenant. If we think it is sustainable, we will finance it’.
Ideally, however, there should be a good balance in the tenant mix, he said: ‘I think 15-20% is about right. I might have concerns about a 30,000 m2 building all for co-working’.
The trend is already changing the sector, said Árpád Török MRICS, Chief Executive Officer, TriGranit Corporation: ‘It is disruptive for traditional office developers, who either team up with these operators or create their own brand. The concept will remain strong, but it will be interesting to see who will be the winners, which players will still be around in ten years’ time’.
Abt said he had no doubt about the sustainability of the sector even in a downturn: ‘I don’t believe there will be a crisis, but a market correction would drive even more tenants to flexible work-space solutions. We’ll have higher occupancy’.
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