Behind the Hype

February 2019

Hannah Dwyer

Director & Head of Research

JLL Ireland

Consolidated & flexible portfolios

New types of space

Tech enabled workplaces

Getty

Tech and Real Estate | They Now Collide

3Traditional

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Flex Space | What is it?

It’s far more than…

Coworking

It goes beyond…

It’s not simply…

More to it than…

Sofas and

free beer

Any space (desks or more

comprehensive office space)

provided on short-term leases, at

variable prices or alternatively

on a membership basis

So how do

we define

flex space?

5

Traditional to Innovative | Drivers of Flexible Space Use

Productivity

To

uch

-do

wn

sp

ace

Swing space

Portfolio optimisation

Ta

lent

att

ractio

n

New ideas

Silo breaking

Cu

ltu

re c

ha

ng

e

Internal entrepreneurship

Expansion

Innovation

Co

mm

un

ity Recruitment

Retention

M&

A

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Is the Flex Space (r)evolution for real?

How disruptive can Flex Space be?

How does Flex Space impact office

investment decisions?

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8

Is Flex Space for real? | Strong growth in Europe since 2015

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018E

New Openings (sq ft, LHS) Total Flex Stock (sq ft, RHS)

*Top 20 European markets. 2018E Preliminary numbers

© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

9

Is Flex Space for real? | Major European Cities Leading Way

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Is Flex Space a new business model?

Is Flex Space enlarging the overall market

or replacing current supply?

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12

Business Model | Flex Space models and brands are evolving

Business centre HybridCo-working Landlord initiatives

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80%

21%

13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Hybrid Coworking Serviced office

Flex Space Growth 2017

Business Model | Full Service Brands Driving Flex Space

13*Based on: Amsterdam, Barcelona, Brussels, Berlin, Budapest, Dublin, Dusseldorf, Frankfurt, Hamburg, Lisbon, London, Madrid, Milan, Munich, Oslo, Paris, Prague, Rome, Stockholm, Warsaw.

20%

30%

50%

Total Flex Space Supply

Coworking Full service Business centre

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14

Dublin Flex Space Providers

WeWork

Iconic

Regus

The Digital Hub

Glandore

DOC

Pembroke Hall

Dogpatch Labs

Huckletree

International Corporate Centre

No 51

Us & Co.

Total 1.5

million sq ft

Dublin’s top two flex space operators

represent 51% of the overall market

1.6 million sq. ft. of flexible space

across 114 locations in Dublin

5% of total city centre stock

133% growth rate in market from

2012 to 2018

Business Model | Dublin is a Growing Market

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Is Flex Space a new business model?

Is Flex Space enlarging the overall market

or replacing current supply?

15© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

16

Enlargement? | Small leasing Deals Decline

0

2

4

6

8

10

12

14

16

18

0

10

20

30

40

50

60

70

80

90

1002005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Ta

ke

-Up

<5,0

00

sq

ft (m

illio

n s

q ft)

To

tal Ta

ke-U

p (

Mill

ion

sq

ft)

European Office Take-Up

Take-Up Total* Take-Up (<5000 sq ft Deals)*

*Berlin, Budapest, Cologne, Dublin, Dusseldorf, Frankfurt/M, Hamburg, Lisbon, Milan, Munich, Paris, Rome, Stuttgart

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0%

2%

4%

6%

8%

10%

12%

14%

2014 2015 2016 2017 2018

% o

f To

tal Ta

ke

-Up

Dublin Flex Space and Small Lettings in Take-up

<500 sq m as % of total take-up Take-up as % of flex<5,000 sq ft

Enlargement? | Large Corporates

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Business Model | Flex Space Competition

18

Flex operators compete directly with traditional

leases…

0

20

40

60

80

100

120

Flex Traditional Lease

€ p

er

sq

ft

Dublin Occupancy Cost

Flex Provider (Example 1)

Flex Provider(Example 2)

Client No. of Desks 7 24

Client Price PerDesk € 1,088 € 1,356

Client Annual Cost €91,344 €387,600

Flex Provider Desks 13 50

Flex Provider Price Per Desk € 586 € 651

Flex Provider Annual Cost € 91,344 € 387,600

Flex Space Costs

2 Occupier Case Studies

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20

Measure the Market | Dublin Take-Up

Double

take-up??195

200

205

210

215

220

225

230

235

2016 2017 2018 e

-00

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Num

ber

of

Deals

'000 s

q ft

Take-Up Excluding Flex Space

Take-Up Take-Up (ex. Flex) No. of Deals No. of Deals (ex. Flex)

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Lease Length | Dublin Long Leases

21

0 5 10 15 20 25 30

SwedenFinland

GermanyNetherlands

NorwaySpain

ItalyLuxembourg

BelgiumFranceDublin

Continental Europe – Lease terms

First break Remaining lease term

Dublin 20-25

year lease

with break at

year 10

Flex Space ‘lease’ length =

3 months +

3 year term for corporates (bespoke)

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Location | Core Submarkets are the Initial Focus…

22

-

10

20

30

40

50

60

70

-

100

200

300

400

500

600

700

800

900

Nu

mb

er

of L

oca

tio

ns

To

tal S

pa

ce

('0

00

sq

ft)

Dublin Flex Locations

65% of Flex Space in Europe in City Centre

77% of Flex Space in Dublin in City Centre

WeWork

Iconic

Regus

Pembroke Hall

Glandore

Other

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Rents | Some Deals Above Prime to Obtain Best Space

23

-40%

-30%

-20%

-10%

0%

10%

20%

WeWork Transactions vs Prime Rent

WeWork Contracted Rent vs Submarket Prime Rent

Avg Flex Contracted Rent vs Submarket Prime Rent

WeWork 1 GQ

Date: Q4 2017

Size: 49,697 sq ft

WeWork 5 Harcourt

Date: Q2 2018

Size: 50,000 sq ft

WeWork Dublin Landings

Date: Q1 2018

Size: 99,500 sq ft

Flex operators now willing to pay top rents…

[NB: 0% = Submarket Prime Rent]

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Market Value | Yield Impact for Flex Space-Anchored Assets

24

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

Yie

ld

Image Source: www.ballymoregroup.com

Name: 2 Dublin LandingsSold by: Ballymore & Oxley

Size: 99,513 sq ft

Purchased by: JR Asset Management (for a Korean fund)

Flex space tenant: WeWork

Purchase Price: €105 million

Initial Yield: 4.23%

Prime Office yield: 4.00%

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25

The Future | What to Expect from the Future of Flex Space

Sustained growth Fundamental

shift in

occupation

Dynamic

operator

environment

Global trend

with local

implications

Lasting impact on

traditional market

participants

© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

Hannah Dwyer

Director

Head of Research

JLL Ireland

hannah.dwyer@eu.jll.com

01 673 1665

© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.