Co-working space seen as boon for office landlords and tenants

Co-working spaces, a concept which made its way here six years ago, can be a hedge for office landlords against a wave of new office completions.

Rather than engage in an intense price war on rental incentives and subsidies, developers can take a dip in this “blue ocean” to gain a competitive advantage over their peers, Cushman & Wakefield says in a new report.

One way is to carve out undesirable or non-performing space for tenants to benefit from the option of renting the co-working space on a needs basis.

Developers may also consider bundling a portion of the vacant space with committed space under a “co-working concept” for quality anchor tenants.

Office landlord Keppel Land, for one, has waded into the co-working space under a new business venture, Workspace, which spans 6,400 square feet on the fourth level of Keppel Towers offering both serviced office and co-working spaces.

This caters largely to small startups in the service industry.

Cushman & Wakefield noted that such a concept could gain traction.

Technology is among the few sectors that have been on an expansion trail since the global financial crisis and a basket of technology firms tracked by the consultancy shows that their space requirements have increased by over 50 per cent annually on average since they first set up permanent offices here.

But rigid terms in their existing lease terms are stopping them from instantaneously re-scaling their space requirements.

Since the first co-working space, Hackerspace, opened its doors here in 2009, nearly 40 co-working offices have sprung up islandwide, of which 80 per cent are located outside the CBD.

Unlike serviced offices with private rooms, co-working spaces have large open areas that encourage communication and cross-pollination of ideas and promote a sense of community as members are encouraged to host and join events for networking purpose.

Co-working operators charge a monthly membership fee for the use of hot-desking, designated work stations and shared facilities. Some even extend professional services such as web design, accounting and legal support to startups. Such operators have drawn huge interest from venture capitalists and funds globally.

Seeing the rising demand for co- working spaces, many operators have spelt out plans to expand across Asia.

Home-grown company JustGroup launched its co-working space under JustCo last September, following the launch of its serviced offices under JustOffice in 2012.

JustGroup now operates co-working spaces in two locations – 120 Robinson Road and 6 Raffles Quay – totalling 50,000 sq ft and serviced offices spanning 150,000 sq ft in five locations, with the occupancy rate hovering at 95-100 per cent.

Backed by two investment management firms, JustGroup plans to have more co-working spaces in Singapore and serviced offices in other major cities in the Asia-Pacific region following its inaugural opening in Shanghai.

Global workspace provider Regus in 2014 partnered the Infocomm Development Authority of Singapore and the National Library Board to launch “smart work centres”, or flexible mobile workstations, at three libraries here.

All of Regus’s locations, including the upcoming Guoco Tower in Tanjong Pagar, have co-working space and serviced offices.

Cushman & Wakefield noted that since many workers do not utilise their space every day, the provision of co-working space enables serviced office operators to tap a growing source of revenue as they can sell more co-working memberships than what the physical space can allow.

“Given the stability of demand from co-working and its profitability, we are of the view that now is the opportune time for co-working operators to look at expansion, taking advantage of the current supply situation: a total of 3.6 million sq ft of Grade A office space is entering the market in 2016,” said Cushman & Wakefield research director Christine Li.

More overseas players are looking to enter Singapore. The Hive, a co-working operator with locations in Hong Kong and Bangkok, is among the latest to establish a presence here, occupying four floors of three combined shophouses in New Bridge Road.

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