Presentation belgian serviced office market analysis oktober 2019
1. fin POWER
The serviced office market in Belgium
(coworking + business centers)
SERVICED OFFICE MARKET IN BELGIUM
Key financial figures
B.W.A. Conference, October 22nd 2019
2. I. History and evolution of # flexible workspaces
II. Evolution within the Belgian Office market
III. The business centre market : actual situation
IV. Key financials of the business centres in Belgium
V. Conclusions
INTRODUCTION
3. Business & coworking-centers in Belgium :
Slides available on internet
What is a business or coworking-center ?
Uses this as name of his business (business center or coworking-space or both)
Business center : full-time reception available – cfr. VAT-regulation for business centers
Coworking-center : focus on ‘community’, community manager, no full time reception necessary
Serviced offices = full time reception services or community-manager
Used figures :
Published financial data (Belgian National Bank)
INTRODUCTION
“Definitions and limitations”
4. I. HISTORY
“A fast-growing market with a rich history”
• First boom of business centres
was between 1985 and 1990.
• Then, 95-2005 : more failures
then start-ups in our market
until …
• 2005-6 : start of the ‘New Way
of Working’
• From then, we see an
acceleration of the growth of
locations from 5-10 % (2005-
2010) to 10-20% actually
• In 2019, the Belgian market has
grown to more then 450
centre's, a growth with 19 % vs.
2018.
5. Kantoren (x 1,000 m²) Jun. 19
Brussel 12 757 000
CBD - Central business district 9 267 000
Decentraal 2 100 000
Periferie 1 390 000
Antwerpen 2 277 000
Gent 1 342 000
4 andere 'kantoorsteden' 400 - 500,000
(Liège, Mechelen, Leuven, Namur)
15 'regionale steden' 150 - 350,000
(f.ex. Kortrijk, Roeselare, Brugge, St. Niklaas, Aalst, )
30 'kleine' steden
(25-60,000 inwoners) 50 - 100,000
Totaal 24 176 000
# Business centres (in m²)
Number : 265
Average surface : 2 329
Total surface occupied : 617 121
in % of office market : 2,55%
# Co working centers
Number : 185
Average surface : 519
Total surface occupied : 96 050
in % of office market : 0,40%
in % of business center market : 15,56%
Total serviced office surface: 713 171
% oppervlakte 'serviced offices' 2,95%
II. BELGIAN OFFICE MARKET
Situating within the total ‘OFFICE MARKET’
5
Office-market in Belgium
Stable market with appr. 24 Mio office space
Market of ‘larger cities’ very well documented
Estimate of regional cities and total market in collaboration
with CBRE.
Total ca. 24 Mio m², accommodation for > 1 Mio
collaborators (employees + civil servants in office
environments)
Business center market
Total : ca. 265 business centers, appr. 620,000 m² office space.
Accounts for appr. 2,5 % of total office space in Belgium
Co working market
Total ca. 185 Coworking spaces, nearly 100,000 m² office space.
The business and coworking-market covers
nearly 3 % of the total office market in Belgium.
6. II. BELIAN OFFICE MARKET
Situating within the total ‘OFFICE MARKET’
6The office market is shifting towards the ‘serviced offices’
Serviced Office market
Flexible contracts (month/year/…)
Focus on services and community
Office market
‘long term contracts’
No flexibility
Limited services (facilities)
Limited ‘new constructions’ < 2 % of
market
Decreasing demand due to NWOW
Coworking market
< monthly ‘memberships’
Flexible, focus on ‘community’
Limited but increasing services
Market growth > 20 %/year
Business centre market
Flexible ‘yearly’ contracts
Flexible, focus on ‘services’
Limited but increasing community
Market growth 10-20 %/year
Decreasing
market ?
Increasing market
Difference is fading away
7. Total appr. 450 “serviced office locations”
in Belgium :
50% of the market are ‘individual
players’
Bedrijvencentra, Bar D’office, Cowallonia
“group” several ‘independent’ centers
IWG is the biggest ‘operator’ with > 40
locations
More then 20 operators have more then
3 centers increasing professionality.
> 50 % of the market remain ‘stand-
alone initiatives
In Belgium, we have a relatively fragmented market, where less
then 50% of the centers is operated by or within a ‘group’.
III. BUSINESS CENTERS IN BELGIUM
3.1. Operators of business and coworking-centers
8. Medium ‘penetration’ is 3% in
Belgium
Brussels is with 2,5 % still
‘lower’ penetrated
Most cities have between 3 and
5 % of ‘service offices’ (incl.
Antwerp, Liège, Leuven and
Charleroi)
Hasselt, Louvain-La-Neuve,
Turnhout, Genk and Ieper have
a more then 5 % market
penetration of serviced offices
Namur, Brugge, Roeselare en
Charleroi are cities with still less
then 2 % of their offices
operational as serviced offices.
The ‘local’ situation in the different cities is clearly very different.
III. BUSINESS CENTERS IN BELGIUM
3.2 Business centers by location
Sources: CBRE, Finpower
9. IV. FINANCIAL DATA OF BUSINESS CENTER MARKET
4.1. Turnover evolution
• Turnover
– Total market turnover has passed the 150 Mio in
2018 - a growth of 12,7 % vs. 2017
• Growth rhythm
– The ‘market’ growth in turnover has been
fluctuating between 6 and 12 % the pas 10 years
– More ‘stable’ and ‘lower’ than the growth in
number of centers and in m²
• Stable: logic given the ‘start-up-growth’ in turnover of a
new center faster growth in number and m² then in
turnover
• Lower : indication of ‘price-erosion’ seen in the market
from 2006 – 2012.
– Still present due to the increased competition ?
– Very difficult to measure
Turnover growth of the market has increased to 13 % in 2018 – in line with the
growth of the number of operational centers.
10. IV. FINANCIAL DATA OF BUSINESS CENTER MARKET
4.2 Operational profit (EBIT) of business centers
• Due to the high start-up costs of the
new centers, the traditional
operational profit of the market has
decreased to a loss of 1,7 Mio € in
2018.
• 44 % of the centers in our market have
an operational loss in 2018
– In line with international figures (Deskmag)
• Only 52 % of the centers generate a
net profit during 2018
• This decrease in profitability will be the
challenge of our market the following
years.
The profitability of our market is a challenge, where 44 % of the
centers are (still) not profitable in 2018.
11. IV. FINANCIAL DATA OF BUSINESS CENTER MARKET
4.2 Operational profit (EBIT) of business centers
• Main ‘financial’ issue of our market : start-up costs of new business or coworking centers
– Up to > 0,5 Mio for several new centers in 2017-18
– Total start-up losses of business centers opened in 2015-2017 are estimated at 3,5 Mio in 2018
• Making abstraction of those ‘start-up-losses’, the medium profitability of operating centers has
dropped from 4,5 tot 1,5 % - clearly a signal of an increased competition and pricing.
The growth of the market (and competition) has dropped the median
profitability of the market from 4,5 % in 2017 tot 1,3 % in 2018.
2018 Turnover
Operating
profit
in % of
turnover 2017
Total, all centers : 151 802 -1 728 -1,14% 1,08%
New centers 2015 - 2017 13 455 -3 470 -25,79% -36,24%
Total 'mature centers' 138 347 1 742 1,26% 4,47%
12. Conclusions
• The business and coworking market are ‘integrating’ more and more towards a
service-office market
– Business Center and real-estate-groups are ‘incorporating’ the coworking ‘community’-
concept.
• The number of ‘service office centers’ has increased to more then 450 in 2019,a
growth of 17 % vs 2018.
• This means that the service office market occupies nearly 3 % of the Belgian
office market, which is double the level of our first analysis in 2014.
• The profitability of the market comes under much stress due to the increasing
losses of new-opened centers. In 2018, 45 % of all centers have operational
losses, and the medium operating profit of mature centers is less then 2 % on
turnover.
14. Annex 1 : Advantages of scale in our market
• There are clearly a lot of advantages of scale in
the business center market
– Commercially (website, referrals, …)
– Purchasing power, also on management-level
– Strategically and ‘best practices’
• But, the medium turnover of a business center
is declining ….
– And, we have not included the coworking-centers in this
comparison …
• We have put the ‘profitability’ of a center compared with the ‘size’ of each
center.
– Profitability = profit margin on turnover
– Size = turnover by center
• The ‘regression-line’ clearly demonstrates
– The substantial losses that a business center makes in his 1-2 starting years
(between 100 and 500 k€)
– A ‘break-even’ level of a ‘median’ center around 500 k€ turnover
– Above 600-700 k€ turnover, most of the business centers are profitable.
15. Annex 2 : Different financial models in our market
• Asset – efficiency of ‘International market’ is very high – no investment in ‘own’ buildings
– Private and public sector operators mostly have invested in the building
• Financial leverage of public sector very limited (cash > loan volume)
The ‘international’ operators focus optimizing their financial
leverage with ‘renting’ their buildings, the private (partially) and
public sector (mainly) focus on owning the real-estate.
Turn-
over
Fixed
Assets
Assets/
Turnover
Own
Funds
Own
Funds/
Assets
Own
funds/
Turnover
International 26.295 5.480 0,2 -8.223 -1,5 -0,3
Private 45.944 132.465 2,9 63.353 0,5 1,4
Semi-public 25.241 112.922 4,5 107.489 1,0 4,3