Post on 14-Jul-2020
transcript
Behind the Hype
February 2019
Hannah Dwyer
Director & Head of Research
JLL Ireland
Consolidated & flexible portfolios
New types of space
Tech enabled workplaces
Getty
Tech and Real Estate | They Now Collide
3Traditional
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Flex Space | What is it?
It’s far more than…
Coworking
It goes beyond…
It’s not simply…
More to it than…
Sofas and
free beer
Any space (desks or more
comprehensive office space)
provided on short-term leases, at
variable prices or alternatively
on a membership basis
So how do
we define
flex space?
5
Traditional to Innovative | Drivers of Flexible Space Use
Productivity
To
uch
-do
wn
sp
ace
Swing space
Portfolio optimisation
Ta
lent
att
ractio
n
New ideas
Silo breaking
Cu
ltu
re c
ha
ng
e
Internal entrepreneurship
Expansion
Innovation
Co
mm
un
ity Recruitment
Retention
M&
A
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Is the Flex Space (r)evolution for real?
How disruptive can Flex Space be?
How does Flex Space impact office
investment decisions?
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8
Is Flex Space for real? | Strong growth in Europe since 2015
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018E
New Openings (sq ft, LHS) Total Flex Stock (sq ft, RHS)
*Top 20 European markets. 2018E Preliminary numbers
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9
Is Flex Space for real? | Major European Cities Leading Way
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Is Flex Space a new business model?
Is Flex Space enlarging the overall market
or replacing current supply?
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12
Business Model | Flex Space models and brands are evolving
Business centre HybridCo-working Landlord initiatives
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80%
21%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Hybrid Coworking Serviced office
Flex Space Growth 2017
Business Model | Full Service Brands Driving Flex Space
13*Based on: Amsterdam, Barcelona, Brussels, Berlin, Budapest, Dublin, Dusseldorf, Frankfurt, Hamburg, Lisbon, London, Madrid, Milan, Munich, Oslo, Paris, Prague, Rome, Stockholm, Warsaw.
20%
30%
50%
Total Flex Space Supply
Coworking Full service Business centre
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14
Dublin Flex Space Providers
WeWork
Iconic
Regus
The Digital Hub
Glandore
DOC
Pembroke Hall
Dogpatch Labs
Huckletree
International Corporate Centre
No 51
Us & Co.
Total 1.5
million sq ft
Dublin’s top two flex space operators
represent 51% of the overall market
1.6 million sq. ft. of flexible space
across 114 locations in Dublin
5% of total city centre stock
133% growth rate in market from
2012 to 2018
Business Model | Dublin is a Growing Market
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Is Flex Space a new business model?
Is Flex Space enlarging the overall market
or replacing current supply?
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16
Enlargement? | Small leasing Deals Decline
0
2
4
6
8
10
12
14
16
18
0
10
20
30
40
50
60
70
80
90
1002005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Ta
ke
-Up
<5,0
00
sq
ft (m
illio
n s
q ft)
To
tal Ta
ke-U
p (
Mill
ion
sq
ft)
European Office Take-Up
Take-Up Total* Take-Up (<5000 sq ft Deals)*
*Berlin, Budapest, Cologne, Dublin, Dusseldorf, Frankfurt/M, Hamburg, Lisbon, Milan, Munich, Paris, Rome, Stuttgart
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0%
2%
4%
6%
8%
10%
12%
14%
2014 2015 2016 2017 2018
% o
f To
tal Ta
ke
-Up
Dublin Flex Space and Small Lettings in Take-up
<500 sq m as % of total take-up Take-up as % of flex<5,000 sq ft
Enlargement? | Large Corporates
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Business Model | Flex Space Competition
18
Flex operators compete directly with traditional
leases…
0
20
40
60
80
100
120
Flex Traditional Lease
€ p
er
sq
ft
Dublin Occupancy Cost
Flex Provider (Example 1)
Flex Provider(Example 2)
Client No. of Desks 7 24
Client Price PerDesk € 1,088 € 1,356
Client Annual Cost €91,344 €387,600
Flex Provider Desks 13 50
Flex Provider Price Per Desk € 586 € 651
Flex Provider Annual Cost € 91,344 € 387,600
Flex Space Costs
2 Occupier Case Studies
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20
Measure the Market | Dublin Take-Up
Double
take-up??195
200
205
210
215
220
225
230
235
2016 2017 2018 e
-00
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
Num
ber
of
Deals
'000 s
q ft
Take-Up Excluding Flex Space
Take-Up Take-Up (ex. Flex) No. of Deals No. of Deals (ex. Flex)
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Lease Length | Dublin Long Leases
21
0 5 10 15 20 25 30
SwedenFinland
GermanyNetherlands
NorwaySpain
ItalyLuxembourg
BelgiumFranceDublin
Continental Europe – Lease terms
First break Remaining lease term
Dublin 20-25
year lease
with break at
year 10
Flex Space ‘lease’ length =
3 months +
3 year term for corporates (bespoke)
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Location | Core Submarkets are the Initial Focus…
22
-
10
20
30
40
50
60
70
-
100
200
300
400
500
600
700
800
900
Nu
mb
er
of L
oca
tio
ns
To
tal S
pa
ce
('0
00
sq
ft)
Dublin Flex Locations
65% of Flex Space in Europe in City Centre
77% of Flex Space in Dublin in City Centre
WeWork
Iconic
Regus
Pembroke Hall
Glandore
Other
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Rents | Some Deals Above Prime to Obtain Best Space
23
-40%
-30%
-20%
-10%
0%
10%
20%
WeWork Transactions vs Prime Rent
WeWork Contracted Rent vs Submarket Prime Rent
Avg Flex Contracted Rent vs Submarket Prime Rent
WeWork 1 GQ
Date: Q4 2017
Size: 49,697 sq ft
WeWork 5 Harcourt
Date: Q2 2018
Size: 50,000 sq ft
WeWork Dublin Landings
Date: Q1 2018
Size: 99,500 sq ft
Flex operators now willing to pay top rents…
[NB: 0% = Submarket Prime Rent]
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Market Value | Yield Impact for Flex Space-Anchored Assets
24
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
Yie
ld
Image Source: www.ballymoregroup.com
Name: 2 Dublin LandingsSold by: Ballymore & Oxley
Size: 99,513 sq ft
Purchased by: JR Asset Management (for a Korean fund)
Flex space tenant: WeWork
Purchase Price: €105 million
Initial Yield: 4.23%
Prime Office yield: 4.00%
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25
The Future | What to Expect from the Future of Flex Space
Sustained growth Fundamental
shift in
occupation
Dynamic
operator
environment
Global trend
with local
implications
Lasting impact on
traditional market
participants
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Hannah Dwyer
Director
Head of Research
JLL Ireland
hannah.dwyer@eu.jll.com
01 673 1665
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