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Co-working goes from fad to fixture
THE modern work places have come a long way, shifting from sterile fluorescent tube-lit and cubicle-filled offices to swanky spaces resembling a chic apartment or hotel lobby. The demand for co-working or flexible workspace - led initially by startups, freelancers and tech firms - has grown substantially since 2015 as large businesses embrace the sharing economy.
Colliers International's survey of the top 200 occupiers in Asia revealed that 91 per cent of them were considering using flexible workspace. Across some major markets in the region, the take-up from flexible workspace operators accounted for up to 30 per cent of the overall market in 2017, driven by the thirst for flexibility from multinational corporations.
Singapore has arguably been the most exciting market in the Asia-Pacific for the flexible workspace sector. There has been expansion from local operators, with JustCo and The Great Room grabbing headlines, while we have also seen mainland Chinese operators enter the market. And of course, WeWork which also acquired flexible workspace provider Spacemob.
What started out as a disruptor and an alternative to traditional offices is now a fundamental part of the commercial real estate market. Flexible workspace is a sector in its own right - growing in size and importance to landlords and occupiers.
Merits of coworking
Coworking has an alluring draw to it, and the creative vibes experienced in these environments is a big talent magnet, particularly among the tech-savvy millennial workforce.
But beyond the aesthetics and frills - attractive interior design, plush armchairs, beer on tap and pool tables - co-working provides flexibility, allowing occupiers to directly correlate their headcount to real estate costs, and move away from long-term, fixed contracts.
In addition, it offers the opportunity to give staff mobility, a creative and productive environment, as well as a platform to mingle with dynamic startups and entrepreneurs. Well-designed, open and collaborative workspaces foster better interaction and help to encourage the flow of ideas and drive productivity.
From the developers' and landlords' perspective, flexible workspaces and their community help to enliven buildings as well as enable attraction of new occupiers and the retention of existing tenants with space constraints.
Having a flexible workspace operator in a development is also a strategy for future organic growth, as the startups may eventually lease office space within the landlord's development or portfolio, as a direct result of their experience in the flexible offering.
Coworking in Singapore
The flight to efficiency - where a firm moves from an older building to a newer and more efficient one - witnessed in the office market in Singapore in recent years has left pockets of vacant space in prime Central Business District (CBD) buildings, which has to date mostly been backfilled with flexible workspace operators.
As at the end of 2017, there were 113 flexible workspace centres in the CBD. They occupied 3.9 per cent of the premium and Grade-A office space, at about 944,000 sq ft of net lettable area - an increase of 36 per cent from 2016.
Island-wide, across all office grades, co-working and other flexible workspace operators occupied a total of about 2.1 million sq ft of net lettable area last year, up from nearly 1.5 million sq ft in 2016.
Major market activity last year included The Great Room expanding to a whole floor at One George Street and subsequently securing a new site consisting two floors at Centennial Tower (approximately 38,000 sq ft).
Mainland Chinese operator Ucommune entered the Singapore CBD with a modest take-up of space, while the biggest deal of 2017 was a 62,000 sq ft market entry from Distrii in Republic Plaza in a partnership with landlord City Developments. JustCo followed closely behind with 60,000 sq ft acquisition of space at Marina Square.
There was some minor turbulence in the market with Lattice80 exiting its Robinson Road location and the on-off proposed merger between nakedHub and JustCo eventually resulting in the two operators going their separate ways.
WeWork, by contrast, absorbed Spacemob into its global brand and opened the first WeWork centre on Beach Road, with 71 Robinson Road secured and due to open in 2018. The shared workspace provider has also committed to several other locations, including Funan, China Square Central, and 8 Cross Street.
With Singapore considered the most mature market in the Asia-Pacific for this sector, landlord interest in flexible workspace operators is set to continue to grow, a stark difference from the attitudes some 18-24 months ago.
The recent success and occupier demand for flexible workspace has resonated with landlords who now see it as a necessity to secure an operator within their developments.
Some landlords are producing their own platforms, with Ascendas-Singbridge launching its own concept and Lendlease continuing to explore the best way of operating its new development Paya Lebar Quarter given new demands from corporate occupiers.
Keppel Land continues to grow its Kloud offering within Keppel Bay Tower, with a view of rolling it out throughout its regional portfolio.
Meanwhile, CapitaLand has operators as tenants and in some cases partners, but is also driving its own offering with the rollout of its Flexi-Suites brand at 20 Anson Road, utilising a whole floor of just under 13,000 sq ft.
This year promises to be another exciting year, though both local and international operators will need to look harder for space given that most Grade A buildings already have operators in situ that have secured exclusivity clauses.
Colliers expects to see some assets being repositioned, such as retail podiums and Grade-B office buildings, to accommodate the growth, but also to harness the continuously evolving needs of occupiers.
Further merger and acquisition activity can be expected with some of the larger operators continuing to intensify their market shares and offerings. Multinational corporations will continue to consider the "Flex and Core" strategy, where occupiers take space on a longer-term deal for their core operations together with an agreement with a flexible workspace operator to accommodate volatility in headcount.
The boom in startup culture and the government's push for innovation and enterprise will undoubtedly contribute to the sector's growth. One thing is certain, coworking is here to stay and ever evolving. Colliers projects that flexible workspace operators could take up some 550,000 sq ft of office space in Singapore this year.
- The writer is head of office services at Colliers International