The coworking market has stopped growing

After a long-term growth of the Moscow flexible office market by 18–50% per year, the situation in the segment began to develop in the opposite direction in the first half of 2023. In January-June, the total area of ​​such facilities decreased by 2%. Consultants predict a slight increase by the end of the year – by only 1%, which is the minimum dynamics since 2016. Cooling in the market is facilitated by high vacancy and lower profitability of projects due to increased repair costs. This may make flexible offices unattractive for large developers, and operators of such facilities will switch to projects abroad.

The total area of ​​flexible offices in Moscow in the first half of the year amounted to 394.6 thousand square meters. m, having decreased by 2% by the end of last year, follows from the calculations of CORE.XP. This is due to the closure of a number of co-working spaces with a total area of ​​18.2 thousand square meters. m and low rates of commissioning of new facilities. According to CMWP, over the past six months, the supply of flexible offices increased by only 2.3%, to 402,000 sq. m. m, according to NF Group – by 1%, up to 372 thousand sq. m. m.

This situation indicates a trend reversal in the flexible office segment. CMWP partner Natalya Nikitina recalls that in 2019-2020, the supply of flexible offices in Moscow increased by 50% per year, in 2021 – by 18%, in 2022 – by 35%. But according to the results of 2023, the dynamics will be restrained, CORE.XP predicts: during this time, 28.9 thousand sq. m of new flexible offices, four times less than in 2022.

It follows from the CORE.XP data that both in physical terms and in percentage terms, the increase in new space may be minimal since 2016. Natalia Nikitina links the growth slowdown with the maturity of the segment.

Ivan Demidovich, operating director of the Know Where flexible office network, explains that the business model of this type of real estate has become less attractive. “Lease rates are not rising in proportion to the increase in the cost of finishing, and the departed international companies have vacated a lot of quality space,” he explains. Georgy Golenev, the CEO of the Klyuch network, calls the departure of foreign tenants and a general reduction in demand a problem.

Last year, the plans of many service office operators changed radically, says Ekaterina Belova, head of the office space department at IBC Real Estate. “Earlier, we observed a lot of speculative transactions of operators (rented a room, finished it, rented it out), but now there are much fewer such cases,” she says.

General Director of the Code network Gurgen Shekoyan adds that now many operators are considering foreign directions for development: the opening of new branches abroad slows down processes in Moscow. Many players are suspending projects in Moscow due to the difficulty in forecasting, the direction of flexible offices has been curtailed and some of the developers who developed it, the expert adds.

Most developers have opened flexible offices to fill their properties with tenants, notes partner Ricci | Offices” Dmitry Zhidkov. But now such projects, according to him, are less interesting for business because of the high cost of repairs and, accordingly, low profitability.

According to Ivan Demidovich’s forecasts, flexible offices will be able to return to growth only if the vacancy of space is reduced to 7%. “This may be facilitated by the partial lifting of sanctions or the outpacing growth of the Russian economy,” the expert argues. So far, the market is far from it: according to CORE.XP estimates, 25% of flexible office space is now empty. At the same time, according to analysts, the demand for flexible offices in Moscow remains. According to CORE.XP, in the first half of the year, deals were made in this segment for 51,000 sq. m. m.

Alexandra Mertsalova