Co-working space outlook 'robust' but mixed across Asean markets: Maybank Kim Eng report

AUGUST 27, 2018 - 12:11 PM

The outlook for co-working spaces in Asean seems “robust at the moment”, Maybank Kim Eng analysts Lee Ju Ye and Chua Hak Bin wrote in a recent report, but the landscape varies across the region.

The report cited JLL estimates that co-working spaces could grow from less than 1 per cent of Asean office stock in 2015 to between 10 per cent and 15 per cent in 2030.

Meanwhile, Singapore, Manila and Jakarta have the highest central business district take-up rates for co-working spaces among South-east Asian hubs, according to Colliers.

"A growing gig economy and multinationals’ preference for flexible leasing terms will support growth," the report said.

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Ms Lee and Dr Chua noted that developers across Asia are teaming up with co-working space operators - such as the tie-up between China’s Ucommune and CapitaLand in Singapore - or joining the fray with their own brands, such as Aurum Land’s Collision 8 in Singapore and Clock In in the Philippines’ Makati City, jointly launched by Ayala Land and Acceler8.

Mergers and acquisitions are also picking up, with equity financing in co-working startups hitting US$300 million in 2017. Deals over the past year include United States-based WeWork’s acquisition of Singapore’s Spacemob, as well as the merger of Indonesia’s EV Hive and Clapham Collective.

Still, Ms Lee and Dr Chua cautioned: “While the outlook for co-working players look robust at the moment, a business downturn would mean that they would likely be the first option that firms would consider breaking lease with, as the cost would be lower than breaking a lease with a building owner.”

They added that cyber security and intellectual property risks are also of greater concern, compared with the situation in traditional offices.

ASEANBUSINESS gives you Maybank Kim Eng’s market-by-market observations:

Singapore

  • Co-working space operators are an emerging demand driver in the recovery of the commercial property market
  • Singapore saw the third-fastest growth for flexible workspace worldwide in 2017, based on Instant Group’s data
  • With the average monthly rental for a hot desk between S$220 and S$750 according to ValuePenguin, Singapore workstations are among the cheapest among key markets

Indonesia

  • The number of co-working spaces has soared over the past two years to about 200 offices as at end-June 2018, but some three-quarters of the space is in Jakarta
  • Indonesia faces a continued over-supply of office space, with a projected seven million sq m in floor area by 2020
  • But demand is still weak in the business district, with occupancy at its lowest since 2000
  • Average rentals have declined by 16 per cent from a peak in 2014
  • Bumi Serpong Damai could benefit from co-working space investors renting its office space, while Ciputra Development is another firm looking to let vacant office space to co-working players

The Philippines

  • Co-working space is still relatively new and a small slice of the flexible workspace pie
  • Hosted services are the dominant type of flexible workspace, according to Colliers research, thanks to the business process outsourcing industry
  • Co-working offices are the cheapest type of flexible workspace, compared with serviced offices and hosted services, but “will likely only have a small impact” on the office market
  • The supply of office space will remain above 180,000 sq m between 2018 and 2020
  • The Philippines also has “a relatively smaller startup and entrepreneurial scene” compared with other parts of Asia

Thailand

  • Local players such as Hubba and Draft Board were early movers in the co-working industry
  • The co-working market is still small - between 1 per cent and 2 per cent of office stock - but could grow by 25 per cent in 2018 on international entrants, according to Colliers
  • Key challenges are over-supply and price competition, with mobile operators offering lower rents

Vietnam

  • Co-working spaces made up just 0.5 per cent of office space in Ho Chi Minh and Hanoi as of June 2017, according to CBRE research
  • Local players dominate the market, and information technology users occupied more than half of co-working offices
  • Co-working spaces are cheaper than traditional offices for firms with low headcounts
  • But co-working rental is still more costly than office-tels, which provide both work and living facilities