The coworking and flexible workspace sector has burst onto the commercial real estate scene and quickly took centre stage in a matter of years.
Pivotal in the rapid growth of flexible workspace were occupiers’ rising need for flexibility, focus on collaborative work and community network, as well as the growth of the technology and the gig economy, which made it easier for people to work remotely.
Across major cities in Asia, the flexible workspace sector has risen in importance as a core occupier segment. Colliers International noted in its Flexible Workspace Outlook 2019 report that the sector has witnessed the highest rate of growth in the region - with total space occupied by flexible workspace operators increasing by 35% in Hong Kong, over 40% in Shanghai and continuing its growth in Singapore which has now tripled since 2015.
Jonathan Wright, Head of Flexible Workspace Services (Asia) at Colliers, said, “We expect take-up from operators to continue over 2019, though at a slower growth rate as the sector matures and becomes more focused on specific corporate demand rather than speculative growth in the mid-tier of the sector.”
Singapore: Flexible workspace still going strong
Singapore is considered the most mature market in Asia for flexible workspace and in 2018 registered another record year in terms of take-up. According to Colliers Research, the sector took up 570,000 sq ft of office space in Singapore’s central business district (CBD), accounting for about 45% of the total office net takeup in 2018.
In 2019, the flexible workspace sector is projected to continue to grow – underpinned by strong demand from multinational corporations - potentially taking up 550,000 sq ft of space in the CBD.
WeWork appears to be one of the most aggressive operators, adding new locations in MYP Centre, Funan, Manulife Tower and City House. That said, several local operators also made significant strides – JustCo’s investment from Frasers and GIC has accelerated growth, and The Work Project and The Great Room are delivering premium, hospitality-driven product across the market.
In its Top Micro-markets in Singapore report, Colliers Research highlighted flexible workspace is most concentrated in the Shenton Way/Tanjong Pagar area, occupying 6% of Grade A space in the micro-market.
Tricia Song, Head of Research for Singapore at Colliers, noted, “While CBD office demand has historically been broad-based, driven by the core sectors of financial services, professional services, energy and shipping, this has shifted to technology and flexible workspace operators in recent years. In 2018, we estimate technology and flexible workspace accounted for 75% of net absorption. We expect this trend to continue in 2019.”
Flexible workspace which offers versatile and scalable space to a whole suite of occupiers from startups to MNCs, now takes up about 4% of the total CBD Grade A office space in Singapore. Apart from growing their footprint in the core city centre, flexible workspace operators have started to move into the city fringe with Paya Lebar Quarter (PLQ) being a prime example: IWG (Spaces) took up 52,000 sq ft of space in the mixed development; while developer Lendlease is offering 72,000 sq ft of flexible workspace via its own brand csuites.
The way forward
Indeed, Lendlease’s foray into the flexible workspace business lines up with Colliers’ forecast of key trends for the sector which include amenitisation, premium design, landlord partnerships, new products, and mergers and acquisitions.
- Amenitisation: More occupier-focused amenities that elevate user experience
- Premium design: Creating products that meet changing demands of MNCs
- Landlord partnerships: Building owners increasingly becoming participants in the sector
- New products: Innovative flexible workspace products and bespoke solutions
- M&A: Consolidation of market players driven either by new entrants, mergers of existing operators, or departure of poor performers
Read more about these trends in the report
Mr. Wright added, “2019 will see the flexible workspace sector evolve with new iterations that will continue to disrupt traditional views of what the sector is, and what it can offer building owners and occupiers on a corporate scale as it cements its place as a mainstream real estate asset class, here to stay.”
One thing’s certain, flexible workspace has become the new normal as people embrace new ways of working and companies seek more agility to navigate market uncertainties.
Speak to Colliers today to find out more about opportunities in the flexible workspace sector.
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