Landlords and tenants alike eye booming flexible workspaces
Flexible workspaces are mushrooming around the world emerging as a global trend. Asia-Pacific in particular has embraced coworking workspaces with zeal as one-third of the world’s shared workspaces are operating in this region. Hong Kong ranks first with 322 coworking centres in 2019, followed by Tokyo, Shanghai and Singapore, according to Statista. Worldwide, the city comes only after London (1,423 centres) and New York (548 centres). Multinational corporations and startups have long seen the benefit of coworking spaces, and with COVID-19 transforming business models in ways of survival, entrepreneurs and companies of all sizes and industries could benefit from new tech solutions and flexible facilities on offer by established operators.
While flexible space in Hong Kong witnessed high levels of growth in 2016 to 2018, its rise slowed due to the pandemic but also earlier factors such as the recession and social political unrest, notes Dane Moodie, CBRE’s Senior Director of Advisory and Transaction Services - Office in Hong Kong. As a result, leasing activity as a whole across all sectors remained muted throughout 2020, which inevitably impacts the flexible sector.
Multinational corporations (MNCs) have been quick on the uptake when it comes to using flexible workspaces. As the sector matured and the nature of business evolved, operators are seeing a shift in the type of members taking up a membership with flexible workspace. MNCs are now mainstream members.
Tech startups contribute greatly to the livelihood of these offices. More and more initiatives are being launched. InnoCell for one is a coworking, smart living and co-creation space designed for I&T talents located in the city’s largest R&D base, the Hong Kong Science Park. With a focus on collaboration, interaction and community building, this base aims to become a “hive of technology development” and a “collective ecosystem” for entrepreneurs and stakeholders to use as a launchpad to cutting-edge opportunities within the Greater Bay Area.
Hong Kong offers a unique position in APAC as an axis for business making. As a business centre, the city is always evolving and gradually shaking off its dependence on the financial industry.
Flexible sector operations such as events, conferences, and subscriptions to meeting rooms would have put pressure on operators’ income across the region, according to CBRE. “Whilst activities have been slow, we’ve witnessed minimal membership cancellations, despite a drop in occupancy levels due to the pandemic,” says Moodie, who for the past four years has worked on some of the highest profile deals for the flexible sector in the region.
He adds, “APAC seems to be impacted evenly. The exception is Mainland China operations seem to have resumed again.”
Multinational occupiers have deferred decisions in order to understand the pandemic and its impacts on ways of working. Corporate occupiers are cautious over investing capital in new workplaces while having the added option of staff Working From Home. Tenants have been renewing in 2020 to avoid any Capital Expenditure (CAPEX) however others have viewed flexible space as a strong short-term solution to mitigate moving costs and long term decisions. Moodie says, “In 2020, there was activity but it was geared toward short-term solutions across the region, which was consistent to previous years.”
The senior director expects the flexible sector to be a big focus with MNC occupiers. “There will be a significant increase in the usage for a various number of reasons. Firstly, when you look at the volatility that’s been caused by the pandemic, companies would have concerns about investing a large amount of capital in moving into new cities across the region; but the established flexible spaces offer a good debut platform. The MNCs will probably focus on working with established flexible workspace operators across APAC. Short term space solutions will be a typical trend that will fuel demand as corporates seek to keep CAPEX in control.”
Tenants may consider opportunities to include both traditional and flexible workplaces in their real estate strategy. For example, a traditional occupier that usually has a significant footprint within a Grade-A office building may adopt a hybrid workplace model taking Working From Home policies into account and as a measure to manage the volatility of headcount.
It could also be a parent company hoping to expand without wanting to take up more traditional space. “They would grow into the agile model, into their existing footprint,” Moodie explains. “The ‘hybrid’ may offer a network of small flexible workspaces. For instance, they may open small satellite offices in the New Territories, or Kowloon East where staff could just drop in. The flexible model may support the evolution of work-from-home by offering high quality communication technologies, and it would be a solution for greater cost-savings, enhanced employee wellness and operation efficiency.”
By offering a technology-enabled agile workplace, the flexible work sector will be a key part to reflect on this type of alternate occupancy model; and the trend is certainly getting bigger in Hong Kong.
For operators, in order to achieve growth, they need to enhance their facilities, upgrade building quality and boost the penetration of other market segments.
While landlord attitudes are shifting painfully slowly in Hong Kong. “Conservative” and “inflexible” are some of the terms used to describe their stance. Landlords are becoming increasingly aware that flexibility is an indispensable trait going forward.
“Landlords will have to look at the covenant strength of each of these operators before entering into any agreement or any partnership for future development. But when they have identified the stronger players in the sector, landlords will be more open for discussions, individually.”
CBRE Group owns Hana, a flexible space operator offering corporate real estate expertise. Hana has opened in the last two years with operations limited to the US and the UK at the moment, however there are plans to expand its footprint in Asia Pacific. The Group is set to publish a research study on behaviours in relation to flexible workspaces.
Cowork space operators have shown resilience and a will to innovate their operation models while embracing new tech. Events are an important source of income for many companies and their shift from offline to online has shown great promise for organisers.
Creating unique business values
IOne aspect of COVID-19’s impact on the flexible workspace is that trends in development have been accelerated in Hong Kong. “Companies who want their team in flexible workspaces don’t necessarily want to be signing new leases because of the many uncertainties for the future,” says Constant Tedder, founder of the Hive...
Community power connector
WHub is an interesting player as they define themselves to be an ecosystem builder. “An ecosystem is those who have a collective, in common values and goals,” says Josephine Chan who is COO at WHub. “For those who are within the ecosystem, they all have the same vision.”’...
Emerging trends are consistent across the region where shared workspace memberships have remained steady, despite low occupancy on site due to social distancing measures, corporate or the flexible workspace operators. Apart from existing flexible coworking spaces, traditional work models may give way to alternate occupancies, such as a “hybrid” or “agile” workspaces, which have slowly been many years in the making. New technologies are expected to emerge and existing ones to improve to suit the needs of those transitioning from a traditional work model to a flexible coworking existence.
While landlords may have to adopt a less conservative approach in order to move with the times to cooperate with occupant sentiments, which is feasible once they can identify the strongest operators to work with.
When it comes to events, the shift from offline to online opens up an arena of opportunities for organisers as well as attendees, with innovation challenges for operators. Despite the limitation of physical travel, the virtual kind allows for more participants to attend without worry for visa, time or other travel-related restrictions. Technology evolves to interact and complement one another in seamless efforts to provide one solution for online experiences.
The future of work is to focus on employee wellness and all occupiers - globally - will have to look at this very seriously to remain competitive and relevant post-COVID-19. In order to do so, operators need to continue to have their fingers on the pulse, whether it is to refine their services, upgrade building facilities or improve technologies within their sites.
Contact Us