A group of Melbourne co-working space operators have sent an open letter to Victorian Premier Daniel Andrews calling for an extension of COVID-19 rent relief measures, saying further support will help them lead the economic recovery in the city.
Signed by the operators of 15 city co-working spaces, including the likes of LaunchPad, The Commons, Creative Cubes and Workspace365, the letter points out how these businesses support other small businesses as they grow, and therefore the potential role they could play as Melbourne begins its recovery.
In 2019, 175 co-working spaces across Victoria hosted some 5,000 small and medium-sized businesses, and a total of about 50,000 staff, the letter states.
“In a climate where we need all our industries to operate to their full potential, disregarding the vital work that the co-working industry provides other businesses is a missed opportunity to jump-start the economy,” it says.
However, the signatories to the letter say explicit support from the government is needed now, in order to allow this sector to grow to its full potential.
Specifically, the operators are calling on Andrews to extend the state government’s Commercial Tenancy Relief Scheme beyond its December 31 expiry date to the end of March, to coincide with the end of the JobKeeper program.
Other small businesses based in the Melbourne CBD have also called for an extension, saying paying full rent, plus a portion of their deferrals, will lead to businesses failing at the final hurdle.
“It’s going to be a bloodbath”
LaunchPad co-founder Jeremy Ellis is the driving force behind this campaign. He tells SmartCompany the flexibility afforded by co-working spaces is the very thing that puts them at risk.
“Co-working and flexible office spaces de-risk other businesses,” he explains.
For their small business clients, short lease terms allow for a quick exit, which meaning their bottom line is protected. But the same model leave the co-working spaces “exposed”, says Ellis.
Co-working spaces are in a unique position. While they are, in a sense, landlords themselves, they don’t have the same support mechanisms or protections more traditional landlords might have.
They also have their own landlords to answer to. In prime CBD locations, these are often large, corporate entities that have little interest in helping support their tenants, and their tenants’ tenants.
It’s the same for businesses all over the CBD, says Ellis. If landlords are not legally required to offer support, many won’t.
“Come January 1, it’s going to be a bloodbath.”
Ellis doesn’t speculate on how many co-working spaces would not survive with an extension to the rent relief package, but he says some have already closed their doors for good, and others have been warned their leases will be ending.
“It’s definitely a threat to the industry,” he says.
“This is probably the one last challenge we have to face.”
Surviving and thriving
The frustration for Ellis is that if they can get past this final hurdle, the operators of co-working spaces are looking forward to a growth period in 2021 as businesses of all sizes rethink their need for traditional offices.
Ellis has seen a spike in enquiries about flexible work spaces, and anecdotally, he believes other operators are in the same position.
However, many of those potential new clients are opting to start their contracts in January or February, rather than paying for unused space over the Christmas break.
“What small businesses need is the lowest conceivable level of risk,” he says, adding that traditional landlords just can’t meet that need in a cost-effective way.
“There’s a strong sense that 2021 will be an amazing year for our industry because of that recognition that’s starting to happen,” Ellis explains.
“It’s just a matter of getting through the next few months.”