The co-working office spaces are considered to be the shared workplaces which are being utilized by different professionals. It is practically referred to an office which is hired by the tenants from the landlords to carry out their work processes consisting of Wi-Fi connection and other technological facilities. The growth of the flexible and shared workplaces can be seen in the states of the United Kingdom. The small firms and start-ups have contributed to the increase in the demand for the co-working offices (Nathan, 2017). Thus, the change in the technology, needs for space and views towards the traditional working environment have led to the emergence of the co-working office spaces. It has also led to the development of the relationship between the tenants and landlords within the commercial sector in the UK. The landlords are utilizing the opportunities due to the increase in the demand of the co-working office spaces but they are also facing difficulties while managing it. On the other hand, the tenants expect that adequate facilities are being provided by the landlord at a reasonable price rate.
London can be considered as the global leader for providing flexible workplaces as it has overtaken New York in regards to the number of operations and space. Leasing for flexible workplace has reported an average on 2.9% of the total market in Manhattan and at the same time, it is 10.6% in London. All over the London, more than a fifth of office spaces has been taken by the flexible workplace providers. In 2017, around 2.5 million sq ft of space has been permitted which was almost triple of the last year’s volumes. It shows that 21.1% of all over Central London has been taken up which was 8.5% in 2016. Around 10.7 million aq ft of space all over the Central London has occupied by the flexible workplace operators and just above 4% of all office stock (Coleman, 2018).
As a result, it is reported that WeWork appears as the largest occupier of the space over the five years in London. They have occupied 2,578,000 sq ft of space since 2012. They have crossed Google, Amazon, Deutsche Bank and also The Office Group, the flexible office provider. WeWork now has become the largest office space occupier all over London and the UK government is in the second position. It is expected that in the next year the demand for co-working spaces going to increase (Watson, 2017). It seems that Brexit may increase the demand for a flexible workplace in London as long-term space commitments are being avoided by most of the corporates. New lease accounting standards are also going to increase the demand of flexible workplace as it allows the holder in capitalizing rental liabilities on their balance sheet. The demand of flexible workplace is increasing rapidly which is putting pressure in supplying with the space to complete this demand.
The landlords in the UK are responding to the increase in the demand of the co-working office spaces from the small businesses that have started to avoid the traditional leases. The businesses are also seeking for an extra basis for the growth of their projects on a flexible basis. Flexible brands are being launched by the Landlords and enjoy the advantage of purchasing their buildings. Previously, the thinking of the landlords was that short leases would decrease the value of the building but not they have realized that if they do not carry out this then they are going too left behind (Evans, 2018). In the UK, both the demand and supply for the co-working office spaces are increasing rapidly. The landlords are earning profits from the increase in the demand and they also investing funds for hiring highly skilled staffs who can carry out the planning for the office spaces for the tenants. The real estate agents also welcomed the co-working agents because the traditional real estate market was being captured by the subscription office spaces (Soegoto and Hafandi, 2018). They are earning commissions on each deal which also benefit to both the landlords and tenants.
The growth of the coworking industry is not only benefiting the entrepreneurs of all the sectors but also property managers and landlords. Shared office space is now in demand and it is also growing the demand of the coworking industry. A lot of investment is being done in the coworking industry by the landlords and property managers. The reason for the bright future of property managers and landlords with coworking movement are mentioned below:
Better Build-Outs and Higher Property Value: Now, the offices are not limited to the desks and chairs where the employees can just sit and work. The infrastructure and designing are playing an important role to provide the space a character which makes a direct effect on the environment and productivity of the company. Landlords are focusing on improving the amenities of the building so that it can increase the value of the building. The buildings are being designed and structured keeping in mind to promote efficiency and productivity of the business and style of the working as it is in demand. Coworking companies are leading in this segment as it might become a bit difficult to landlords and property managers to do this. Landlords are supplying their tenants with the beautiful and well-equipped office with the help of coworking. It also helps organizations when they grow up and require more space, they can easily get it within the same property with the same build out (One Touch Investment, 2018).
Technology and innovation: Coworking is helping landlords in providing the latest innovation and technologies to the organizations that are occupying the pace for office. A workplace must be technologically equipped as it is a key to efficiency, and these needs are being met by the coworking spaces. In order to keep the property technologically updated and maintained the landlord and coworking provide with an expert to the property.
Customer base expansion: The businesses are growing rapidly and coworkers are providing space to them as the entrepreneurs are looking for a place in the market and the freelancers as well. The requirement might for the long-term or for short-term(Mohata, 2018). Shorter businesses are the main contributor to this increasing requirement of shared and flexible office spaces as they are increasing their contracts and assignments which require temporary staff and team that spreads all over the locations. It is good for the landlords because they do not need to worry about filling up spaces or looking for accommodation for the property. The property managers are getting assurance from the coworking that their office spaces are not going to be empty and they do not have to worry about it as it is their responsibility to get tenants to fill his/her offices. Landlord and property managers are now focusing on increased property value, how to retain tenants and also on better property credibility. it became possible just because of their relationship with coworking companies.
Landlords and property managers are getting benefit continuously just because of coworking companies. A large amount of money is being invested by the landlords and the property managers in order to build up an office space with the help of coworking companies as there is expenditure on renovation and some other chargers for leasing for the property associated with it(Callender et al., 2007). The rapid growth or movements of tenants are making a direct impact on property managers and the landlords. The risk of an uncertain market has been minimized with the help of coworking spaces and business centers.
The landlords are facing problems due to the costs associated with the development and facilities which is being provided in the co-working office spaces. The tenants need intensive management and appropriate relationship with the landlord. The increase in the competition in this market has led to an increase in the power of the tenants (Wade, 2018). Thus, it has become important for the landlords to maintain a healthy relationship with the tenants by following the rules and regulations. It is also difficult for the landlords to determine the benefits in the initial period because of the rapid growth of the commercial property market. The landlords are also maintaining the rents in order to manage the costs. The profit margins of the landlords are depended on maintaining a gap between their own overheads and rents and the amount of money they charge to the tenants.
The relationship between the landlord and the tenant established with an agreement and both transfer of a possessory estate in actual property and an agreement between both the parties. The development of corporate real estate is helping both the owner and the tenant in communicating with each other and establishing a professional and open relationship between them (Barrett, 2008). They are responsible to maintain all the terms of the contract, such as rules and regulations of the commercial building and a situation where the tenants may stop paying the rent on time. If the landlord who is being assigned by the real state corporation is not efficient in these sectors, the property owner’s experience may decline in its net operating income. The landlord must focus on maintaining the relationship and the mutual understanding between the landlord and the tenant. The critical of area issue which often arise is related to the maintenance of the property (Michaellever, 2018). It is an underway process of services and balancing cost. The tenants want this process to be done properly and in a timely fashion. The property manager is responsible for deciding what is required to protect the physical condition of the commercial building by examining and deciding the most cost-effective way to settle the issue. The efficiency is required from the property manager in four main areas of maintenance- maintenance for new construction, regular maintenance, inhibitory maintenance and corrective maintenance (Cpswfl, 2016).
The tenant employing staffs in the offices should ensure that the workplace needs to meet the following basic requirements:
Ensuring the temperature of the workplace is appropriate
Providing sufficient ventilation, lighting, and space
Providing suitable washing, sanitation and drinking water facilities
Keeping the premises free of waste and clean
Keeping the premises in substantial or good condition
Ensuring the premises is facilitated with adequate services
The landlords have also many responsibilities while renting out an office that is as follows:
It is the responsibility of the tenant to make sure that the fire safety regulations are being followed for the premises. However, if the agreement specifies that safety is the responsibility of the landlord then he or she has to take care of the safety from fire (Nibusinessinfo, 2018).
The responsibility for the management of electrical appliance can be categorized between tenant and landlord. The lease terms and conditions need to be clear. However, in general, the basic wiring of the premises is to be done by the landlord.
Any gas appliances supplied by the landlord then it should be checked appropriately and regularly. The tenant can also take the responsibility as per the agreement.
All the fittings and fixtures are ready to use and safe need to be ensured by the landlord.
The landlord also needs to make sure that the building structure is suitable for use and safe for the tenant (Direct line, 2018).
The landlords invest a huge amount of money for improving the co-working office spaces for increasing satisfaction among the tenants which leads to an increase in the return from the property. The tenants in most of the commercial properties are responsible for maintaining and ensuring their own demise. The tenants pay a service charge for the services that are being provided by the landlord. The increase in satisfaction leads to an increase in the profitability and returns which improves the trustworthiness and reputation of the landlord (Sanderson and Devaney, 2017). The ability to attract and retain tenants decreases void rates that result in the enhancement of real estate performance. The landlord receives rents from the tenants but they have the rights to receive adequate services. Apart from this, the tenants have to follow the terms and conditions as stated in the lease agreement. There has been a gradual shift in behavior and attitude of the landlords depicting towards the more customer-oriented approaches. The relationship marketing is being focused by the landlords in order to ensure satisfaction among the customers. The link between customer satisfaction and customer service is significant in customer relationship management. An appropriate communication with the tenants and understanding of the business needs is considered to be important for ensuring satisfaction among the tenants (Rasila, 2010). The correct pricing of the asset can help to achieve excess returns in the efficient market.
The demand for the co-working offices’ spaces will increase from the larger organizations because the corporate occupiers would like to prefer lower-risk leases and dynamic working culture. Brexit will also contribute to the increase in the demand of the flexible workspace because the corporation would like to avoid the space commitments in long-term (One Touch Investment, 2018). The new lease accounting standards introduced by the IFRS 16 will also drive the demand in which the occupiers need to capitalize the rental liabilities on the financial position statement. The increase in the number of start-up organizations and contractors are seeking office space.
Conclusion
The landlords are benefited from the rise of the co-working spaces within the commercial property sector in the UK. The demand and supply of flexible spaces have been increased providing maximum benefits to both the landlords and tenants. The tenants want flexible office space to support their dynamic working environment and the landlords want to earn maximum benefit (Gertner and Mack, 2017). However, customer satisfaction is considered to be very much important in any which need to be maintained. The relationship between the landlords and tenants is considered to be very much important which is based on the terms and conditions stated in the lease agreement. Tenants and landlords have their own duties and responsibilities which need to be followed in an appropriate manner.
References
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Cpswfl (2016). Effective Tenant Relations – Cushman & Wakefield Commercial Properties Southwest Florida. [online] Cushman & Wakefield Commercial Properties Southwest Florida. Available at: https://www.cpswfl.com/2016/11/09/effective-tenant-relations/ [Accessed 15 Dec. 2018].
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Michaellever (2018). Landlord and Tenant Relationship | Commercial Property and Business Tenancy Terminology | Michael Lever – The Rent Review Specialist. [online] Michaellever.co.uk. Available at: https://www.michaellever.co.uk/terminology/files/08eb54786b84c65efc3fb118d2bc39c4-330.php [Accessed 15 Dec. 2018].
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