SPACES, a co-working subsidiary of IWG Group (Regus), is one of the world’s leading co-working space providers. SPACES approached CBRE to source office locations and find future tenants to occupy all 20 floors in Hong Kong to accommodate expansion plans. SPACES wanted to lease either a whole building or a substantial part of a building. CBRE was also tasked to find a landlord who would accept a non-traditional lease agreement.
List of requirements:
- Finding a suitable office location for SPACES in a low vacancy environment.
- Pre-leasing Sun House prior to the completion of the refurbishment
- Convincing The Sun Company that co-working spaces were in demand and therefore a strong investment opportunity. Establishing a strong, trust-based partnership between SPACES and The Sun Company.
- Convincing The Sun Company to agree to a pure profit-sharing model.
Solution & Outcome
- CBRE was relentless in their online and offline search for buildings with large vacancies in the Greater Central area.
- CBRE leveraged their extensive database to identify clients seeking office space in Greater Central taking into account SPACES’ requirements.
- CBRE collaborated with CBRE Research to present accurate data reflecting the increasing demand from local firms and MNCs for flexible, co-working office environments.
- CBRE facilitated numerous meetings between the tenant and the landlord. The team made arrangements for The Sun Company to visit SPACES’ offices in Singapore and London, where it had already established a presence.
- CBRE presented the client with different financial models to show the upsides of the agreement, justifying the lease terms.
The Sun Company
Objective: Lease out all floors of Sun House soon after the refurbishment completion date.
Outcomes: SPACES committed to leasing the entire building, meaning that The Sun Company would only need to deal with one tenant.
SPACES’ values aligned with The Sun Company’s plans to add more innovation to their investments.
The profit-sharing model presents strong upsides, potentially generating more revenue for The Sun Company than a traditional lease agreement.
The company was protected by a clause: SPACES was required to reach a certain benchmark by a certain year for the contract to continue under pure profit-sharing terms. The Sun Company had the right to convert to a conventional lease if SPACES did not reach the target.
Objective: Secure an office building in the Greater Central area for the company’s expansion.
Outcomes: Despite the low vacancy environment, SPACES was able to secure an entire building for their expansion.
As Sun House was undergoing a refurbishment, SPACES was offered significant branding opportunities at a suitable price point, with long-term rental protection.
SPACES will become the largest co-working space in the Greater Central district.
SPACES did not need to invest in any fit-out of the building.
SPACES secured a nine-year lease with Sun House.