Ben Hurley Reporter

Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Winning the office space race as collaboration grows

Published 30 January 2013 17:25, Updated 31 May 2013 10:17

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Winning the office space race as collaboration grows

Neither Brad Krauskopf or the heads of AMP Capital can remember who started the conversation about bringing Krauskopf’s co-working space The Hub into one of Australia’s slickest new corporate precincts.

Perhaps the idea came out of Hub Melbourne, a shared working space in a heritage building opposite Southern Cross Station, where early stage start-ups share communal desks with some of the country’s biggest companies, including AMP. Workers chat during their breaks or around the water cooler, attend some of the activities hosted on-site and share ideas.

AMP Capital believes flexible work spaces like The Hub are a glimpse into how workplaces might look in the future. Corporate tenants are increasingly critical of the floorspace on their balance sheets, while at the same time looking for new ways to connect with outside talent. So AMP is now in talks with Krauskopf about The Hub occupying one or two floors in its re-vamped Circular Quay business precinct in Sydney, which is about to undergo a $1 billion upgrade. If the talks succeed, it will be the first example of a corporate floor being hosted as co-working space in Australia. It also shows companies are taking note of the sector.

The death of the permanent desk

AMP Capital, one of the country’s three biggest landlords with about 1.3 million square metres of office and industrial floor space under management, anticipates a massive change in the way its corporate tenants use their offices.

The death of the permanent desk is already taking place but some more radical quarters are predicting the end of the single-tenant corporate floor. For AMP, the challenge is to design a business precinct that will be flexible enough to stay relevant for another 40 years as workplaces transform.

“This decade could have the biggest change to the workplace we’ve ever seen,” AMP Capital managing director of office and industrial property Louise Mason says. “We think this is the office sector’s equivalent of e-commerce in the retail sector.”

She says a confluence of factors is driving this change, with the tipping point being the financial crisis, the cost of real estate and the desire of employers to take unused floor space off their balance sheets. And we don’t need to look far for an example of that.

A new frugality

Our interview consisted of a group of four people sitting at the end of a table big enough to host a 20-person banquet, in a large room exclusively for use by AMP Capital that was empty before we arrived. It’s the kind of wasted space that in a decade’s time might be looked back upon in the same way we now look back on the lavish spending and long-lunch days of corporate excess in the 1980s.

Workers are seeing the beginnings of a much more frugal use of space as employers replace big desks and bookshelves with “hot desks” and lockers, and introduce systems that allow people to work from home.

As technology becomes more seamless, markets are increasingly transcending national boundaries. Things like the National Broadband Network will allow video conferencing without the delays or stutters companies have become used to, while the iPad allows video communication that doesn’t need a designated room.

Mason says office space will become more “elastic”. Exclusively leased meeting rooms, lunch rooms and project team break-out spaces could disappear, in place of shared floors that could be reserved in increments of minutes, instead of years.

“It’s about having a variety of spaces so there’s the flexibility of tenants so they don’t have to duplicate a variety of spaces,” Mason says. “As a landlord those are the elements we can provide.”

Global network of co-working spaces

The Hub comes at this from the opposite extreme. It is a global network of co-working spaces. Krauskopf founded and owns the Australian wing. Hub members include young technology start-ups, freelancers, consultants and other knowledge workers who can work from just about anywhere. Krauskopf says the idea of coming into a central location each day is something that doesn’t seem relevant to Gen Ys or, as they come of age, Millennials.

“I don’t think the corporate office is going to disappear but the role is going to change. They are a connection point to other people, so people can feel like they are part of something bigger,” he says.

And while the corporate office may still exist, it may not stay in one location.

“I think we’re going to see the unit by which people take up offices is going to move away from square metres, to the person, the seat or the hour. I may no longer say I need 10,000 square metres, I may say I need 10,000 hours for my workforce and I want it spread across multiple locations. And by the way I’m not going to sign a ten year lease either.”

Even hot-desking, in Krauskopf’s view, is only an early-stage development. At The Hub and other co-working spaces such as Fishburners, multi-million dollar companies sit within earshot of each other, void of the sense of secrecy that shrouds the day-to-day workings of bigger corporations, which want layers of security and preferably a few kilometres between themselves and their competitors.

In aid of collaboration

“The successful organisation in the future will be the one that has mastered collaboration,” Krauskopf says. “Ten years ago we were talking about specialising and niches but now we talk about hyper-specialisation and micro-niches.

“That continued specialisation and minimisation of each chunk of work means that to complete any task you need to collaborate with other organisations.”

Spaces like The Hub can facilitate this kind of exchange. Suits from National Australia Bank are in the same room as the Pozible team – a crowd-funding platform that funds start-ups by amassing pledges of a few dollars each. In such spaces, big companies offer business skills, knowledge and extensive networks but benefit from the innovation, nimbleness and entrepreneurial zeal of start-ups.

NAB executive general manager of small business Cindy Batchelor says having workers at The Hub gives a better understanding of customers.

“Our people go down there, talk to small business, understand what their challenges are and get real-life feedback on what’s actually happening,” she says.

But non-profit Fishburners is not about helping companies. Fishburners co-founder Peter Bradd says it doesn’t allow established companies to use its scarce desks.

“Fishburners’ purpose is to help start-ups grow,” Bradd says. “We’re not interested in helping corporates innovate. It’s more about helping the start-ups grow to solve business problems for corporates.”

Companies can build those relationships by providing discounted or free services, or hosting seminars at Fishburners, Bradd says.

“If big industry doesn’t want to let start-ups know what those problems are, it’s difficult to help them,” he says.

Rapid growth in co-working

According to yearly surveys by online co-working magazine Deskmag, the co-working movement has roughly doubled in size each year since 2006, with more than 1100 spaces worldwide at the start of 2012. Preliminary results from the latest survey found the average member size was increasing and that one-third of all spaces planned to expand to a new location.

Meanwhile, companies such as LiquidSpace are attempting to shake up the office world in the same way Airbnb has changed the travel industry by allowing people to book space in someone else’s workplace if they go somewhere new and need a desk. Google last year launched co-working spaces in London and Tel Aviv for local start-ups.

The big end of town are taking note. The head of knowledge and sustainability at architect Hassell , Steve Coster, worked with major landlords to interview their tenants in his former role at workplace consulting firm DEGW. Hassell also did the fit-out for Hub Melbourne.

The tenants’ main message is the landlords keep thinking we’re going to be happy to sign ten year leases with long options at six terms, and increasingly that may become out of step with the speed and change in our businesses,” Coster says. He says the very definition of both employers and employees is changing. “People’s weddedness to formal, structured, traditional organisations might not persist,” Hassell says. “If I as an employer can access the resources I need without having to have the whole team on a salary the whole year, why do I need to keep that team in-house?

“And if I’m a very talented individual in my area, why do I need to work for just one organisation? I could be working for a whole series of interesting things in my own way. The acceptance of that is so much higher now.”

“From a property perspective [The Hub] is essentially a window into the future of how work might be. People grappling with unwieldy bureaucracy and resource bases are looking for ways to be more nimble, faster and more creative. They can see this is heading in that direction.”

Corporate office space not going away

AMP Capital division development director Lino Caccavo isn’t going that far. But he says the focus has changed from office parks to combined office and retail precincts in good locations that give workers a reason to be physically present.

He says there will always be a demand for the corporate office as a space where the confidential discussions take place and the big dollar deals signed and sealed. And that’s a good thing for AMP. But in ten year’s time, the workplace as we know it could look like a very different place.

“Work is what you do, it’s not where you go,” Caccavo says. “That mentality lies at the bottom of the flexible work practices we’re seeing implemented by a range of organisations.”

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