Coworking comes of age

Mikołaj Niemczycki, coworking clients manager, Cushman & Wakefield: I wouldn’t attach too much importance to these projections. The market has been evolving very quickly. Not so long ago, if someone had asked me whether we would have an increase of 130,000 sqm in the total space leased in this segment in 2018 alone and if coworking would account for 25 pct of the total area leased in the very centre of Warsaw, I would have found it difficult to believe. I think the supply of new locations will continue to grow, although it may not be as rapid as in previous years, when the increase was around 70 pct y-o-y. Operators will be signing contracts for 2020 and 2021 because in 2019 there will be fewer new buildings on the Warsaw market. The perfect location for a leading coworking operators is a building near the underground, right in the city centre, with excellent exposure.

Will there be any new brands on the market?

Definitely. This year we will see whether this happens through organic growth – that is, by developers creating their own locations or by existing operators being taken over and rebranded. This will be the interesting part. The market has reached such a level of maturity that now it’s time for the next step: acquisitions, as has been the case in many other sectors. This is also due to the fact that, as I have mentioned, the number of good, new buildings in good locations, of the right size, is limited – especially in the centre of Warsaw. If this situation continues, a coworking operator who wants to sprint out of the blocks will either have to lease the space well in advance or focus on consolidation.

Is the time for acquisitions now upon us for the coworking segment?

I think it will start this year. We certainly know that negotiations are underway. We are talking here about coworking operators from Scandinavia, Germany and the UK as well as the States and Ukraine...

WeWork is already present in Poland, while we also have IVG with Spaces and Regus. You could say that we have already seen the most exciting debuts. Are spectacular entries like this now unlikely to happen again?

There are still a few operators who are not here yet. One example is The Office Group, owned by Blackstone – the largest asset manager in the world. It’s not clear yet whether this company will want to invest in Poland. There are also operators such as the Cambridge Innovation Group, which specialises in technology hubs. By the way, CIC has already leased 14,000 sqm in Varso in Warsaw. This is an example of how new players are entering the market by diversifying the type of space they offer. There could also be laboratories in Varso rather than just office space. This is also a phenomenon we will be seeing more and more often. Coworking operators will focus on individual sectors, the marketing and the media, to enable them to form a community that gives added value to its members. Perhaps this could be coworking space for lawyers who expect a slightly higher degree of comfort, privacy and a subtly different approach to design. The Nest, near Hala Koszyki in Warsaw, is already trying to position itself with more mature business people in mind. Whether they will be able to sell themselves to such a group is not yet clear, but it will be fascinating to find out. Adgar Group has diversified the space it offers by launching the Be Yourself brand. In fact, in a very short time, a year from entering the coworking sector, they have started offering office suites – complete modules specially designed for companies employing between 50 and 100 people. We are seeing the same with WeWork – which now has modules ranging from one to 100, 200 or even 500 people. So we can see that some coworking operators are focusing on larger companies, not just teams of from five to ten. This is also a way that the range will be diversified.

What else is going to happen apart from diversification?

I think that entering the regions will be another approach for some operators to develop their business further. WeWork and Spaces have been showing an interest in regional markets, but it’s also worth looking at such local operators as O4, which has announced that it wants to establish itself in Lublin and Olsztyn. This is a player that has so far only been present in the TriCity but is now planning to expand beyond it – interestingly, however, not to Warsaw or Kraków, but to smaller provincial cities. So we can see a second wave of operators emerging, local players who think: ok, if I’m ahead of the biggest players where I am I can perhaps enter these smaller cities, where there might be a chance for me to grow. And these cities are also starting to attract large corporations. We have recently closed a deal for Capgemini in Lublin for 70 desks on flexible terms with Business Link, so this is also a promising sign for us.

Are you seeing any signs of the market being saturated?

I think there is still room for growth. Corporations are continuing to invest here. Capital is flowing in from the US, Germany, the UK and many other places. And Brexit may generate even greater tenant activity. The cake is big enough for a large number of operators to take their own slice of it.