Coworking is set to experience exponential growth across Asia as demand spikes from startups, corporates, SMEs and freelancers.
Text by Benjamin Ken Yong
At KoHub in Ko Lanta, an island off Thailand’s southern province, several digital nomads were typing on laptops at a big beach hut. With the sound of waves crashing into the beach, it would seem as if this is a typical internet café by the beach. Not quite – KoHub is the ultimate co-working space. With Fast WiFi and 24-hour comfortable working spaces indoors and outdoors, free coffee, tasty lunch onsite, a great community and regular social events, it is the dream co-working destination.
Plus, you can even live there – a 15-minute walk takes you to comfortable apartments and rooms which are also run by the KoHub management. Full ‘coworkation’ packages are available all year long – Welcome to the Office of the Future.
Another beachfront coworking site is BeachHub at Koh Phangan while Bali’s first coworking space Hubud gives entrepreneurs sweeping views over rice paddy fields as they develop their business ideas.
EXPONENTIAL GROWTH
The co-working industry is booming, growing 71% annually from 2007 to 2015 and is projected to grow 68% annually from 2016 to 2018 globally, according to Statista. Most industry observers believe it will peak in 2018 after exponential growth in 2016 and 2017.
” Cost savings was cited as a driver, followed by leasing flexibility, collaboration and flexibility. ” – CBRE
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5,9″ ihc_mb_template=”1″ ]
“There is going to be exponential growth over the next five years with some predictions saying that by 2030, 30% of office stock will be flexible workspace,” says Jonathan Wright, Colliers’ Flexible Workspace Associate Director.
Last year and this year in particular saw a flurry of openings with competition heating up in key cities such as Hong Kong, Shanghai, Beijing and Singapore; and expansion by existing operators as well as new entrants into Southeast Asian cities such as Manila, Bangkok, Ho Chi Minh City, and Hanoi. Operators are also eyeing Kuala Lumpur, Jakarta and Delhi NCR.
Ever since HSBC took up more than 400 desks in WeWork’s Tower 535 in Hong Kong this year, industry watchers have been predicting a similar move by other corporates in order to cut escalating real estate costs across the region.
Recent research by CBRE reveals that 64% of multinational occupiers plan to use some form of third party office solutions, including co-working space, as an extended resource to their conventional corporate real estate portfolios by 2020. Cost savings was cited as a driver, followed by leasing flexibility, collaboration and flexibility.
The report also says flexible working strategies, including co-working spaces, now play a key role in facilitating interaction between large corporations and startups, standing at the forefront of the evolution of a new business eco-system.
In recent years, there has been an exponential growth of startups and freelancers especially in Shanghai, Beijing, Singapore and Hong Kong, hence the strong demand in these cities. Small Business Labs, an organisation that monitors small businesses around the world, suggests that the number of people renting coworking spaces will grow globally from just under 1 mil in 2016 to nearly 4 mil in 2020.
BENEFITS OF SHARING
What really is co-working and what is its appeal? According to Colliers International’s Flexible Workspace Outlook report published in April, coworking is defined as a working practice that involves different businesses collaborating for a greater end result. The physical manifestation of this is not necessarily sharing an open plan work environment, it can be achieved through slick technology platforms, as well as physically occupying space in close proximity to other businesses.
“The most successful coworking operators offer curated environments where a Community Manager knows their members intimately and is able to engineer the environment to ensure the success of individual businesses and facilitate collaboration within their community and beyond.”
And surprise, it’s not millennials who are the main occupiers – research by Colliers shows that over 60% of users are aged 30 to 50.
For large companies, flexible rental agreements offered by coworking means they can introduce teams into a coworking environment easily and expand or contract the operation as needed. They will also have access to a community of potential clients or partners that can help them expand. Some multinationals such as Verizon have partnered with coworking operators around the globe to bring in tech startups into their own space – this provides them with a platform for their own innovations.
Factors driving multinationals’ use of third-party space
In Singapore, companies such as DBS, Visa, OCBC and Standard Chartered have set aside a coworking environment within their premises to encourage exchange of ideas between their employees and targeted entrepreneurs such as fin-tech startups, according to JLL.
More importantly, there is valuable cost saving estimated at about 25%. All services are included such as internet, phone, office furniture, and standard office supplies. This saves companies valuable time as they don’t have to source and maintain furniture/ furnishings/fittings in a permanent office. It allows them to concentrate on growing their business as well as attracting and retaining talent.
3’Cs’
At the heart of coworking is the 3 ‘Cs’ – Collaboration, Community and Cost-savings – underpinned by a strong technology platform. “Collaboration is the real key, while the space itself is more of a concept than a physical product,” says Colliers’ Wright. He adds that security and privacy concerns are issues that can be overcomed as demonstrated by HSBC, KPMG and PWC.
“The days of going to a set office and sitting at a fixed desk between 9 and 5 just doesn’t fit in with the way work is done anymore,” he concludes.
“At the heart of coworking is the 3 ‘Cs’ – Collaboration, Community and Costsavings – underpinned by a strong technology platform.”
Coworking,” says another analyst, “may well be the ‘millennial’s MBA’ – it could be the testing ground for an entirely reimagined notion of employment.
In fact, more and more companies are built from day one as diffuse organizations, employing hundreds of people without a central office, notes real estate strategist and investor Dror Poleg. “This fluid environment drives young consumers to prefer sharing everything on-demand rather than owning anything outright.”
“Meanwhile, advances in technology are expected to continue to diminish the importance of physical location and redefine the meaning of social interaction.”
Delphine Yip-Horsfield, Chairman and Chief Design Officer of Shanghai-based naked Group, which operates co-working and hospitality businesses agrees. “We believe in the power of the sharing economy and how it might change the future of everything. In the near future of coworking, people don’t even need to own personal computers as everything will be on cloud.”
“The world is changing so fast with technology and the shared economy, and it’s changing every facet of our life. Coworking will continue to evolve and change. At naked, we are constantly pushing the boundary and exploring the future of coworking, which will be beyond work. It will be co-Life – incorporating work, wellness, food, events, learning, et cetera.”
COWORKING ++
Indeed, as noted by JLL, in urban areas, as competition among coworking spaces increases, it’s no longer enough to woo locally based entrepreneurs with creative interiors and good coffee. “Some spaces distinguish themselves by providing Asia-specific mentorship and business resources, like The Outpost in Singapore. Other spaces lure new clients with unique design, such as Refinery’s part restaurant, part coworking space designed specifically for craftsmen. Facilities such as childcare are also becoming a valuable selling point with Trehaus in Singapore — one of the first to offer such service in Southeast Asia.”
Coworking space can also be located at struggling malls as shown by CapitaLand’s recent deal with URwork, says Colliers. “Landlords should reserve less than 30% of their buildings or below 100,000 sq ft for flexible workspace in order to mitigate their risk unless the operator has strong track record and funding, ” it adds.
BATTLE OF THE TITANS
In the last few months, competition has intensified greatly with the merger of Shanghai’s naked Hub and Singapore’s JustGroup. This new entity creates a 41-centre platform covering 140,000 sqm of space across nine cities in six countries.
It will compete directly with the world’s biggest coworking operator, Manhattan-based WeWork, as well as Beijing-based URWork. The latter two, valued at USD20 bil and USD1.3 bil respectively have been expanding aggressively across the US and Asia.
“This deal will allow us to break the USD100 million run-rate revenue before the end of 2017,” Grant Horsfield, founder of naked Group says.
JustCo will oversee the company’s Southeast Asian expansion while naked will focus on Northeast Asia. Horsfield and JustCo’s Founder and CEO, Kong Wan Sing embrace the competition seeing it as healthy because it offers more choices to the end-users.
In fact, they will be building scale swiftly and exponentially, so that “our members can gain even broader networking and partnership opportunities, plus get access to more spaces to work and play, ” notes Kong.
MORE M & A’S
One thing is for sure – the growth in emerging markets is sustainable due to an increasing number of MNCs looking for coworking space in Southeast Asia, and having a desire to mitigate risk, says CBRE. The trend is here to stay and the next wave will hit smaller cities that have great talents, says the founder of another coworking operator.
As more players enter the market, domestic operators will dominate in their own home turf taking up B-grade offices or at locations further away from the CBD while international operators will continue their cross-border expansion. CBRE believes there will be more merger and acquisition activity in the next few years as the market continues its growth trajectory.
[/ihc-hide-content]
