Is the burgeoning co-working office market set to overheat?
Paul Salnikow, a 28-year veteran of the Asian office market who now runs The Executive Centre, says ‘yes’, insisting margins are already thinning
Despite all the recent hype surrounding the growing appeal of co-working office space, the chairman and chief executive of one region’s leading serviced office operators has a sharp warning: “watch out!”
Paul Salnikow, a 28-year veteran of the Asian office market who now runs The Executive Centre, says co-working oversupply is already becoming a major problem in some countries, and that the current upward economic cycle might have run its course, presenting an unexpected shock to an already vulnerable sector.
“The problem for co-working spaces is not their products. Their products are good. The problem is oversupply, which has crushed some prices and made margins difficult,” Salnikow says.
“There are lots of short-term players in the industry now. Investors are thinking all they have to do is build, lease and open for business. But genuine investor want solid revenues and profits.
“A lot of people have discovered that flexible and co-working spaces are exciting. They are opening spaces, taking whole buildings, fitting them out, buying nice furniture … but what happens next? You have to ensure paying clients.”
Salnikow said that fierce competition has already driven rents for such spaces to levels that hardly make a profit, and retention rates for some operators remains very low.
