A combination of sustained high economic growth, government support and financial incentives for new businesses, particularly in the technology sector, has attracted investors and technopreneurs to Asia and in particular, Southeast Asia (“SEA”). These businesses and start-ups generate demand for office spaces. Unsurprisingly, flexible workspace arrangements are favoured for businesses setting up new office locations in the region, where premier real estates in major cities typically command a high rental.
Expanding Potential of Flexible Workspace in Asia
The convenience of a fully-furnished flexible workspace leasing option can be a very attractive proposition. This is important in the early days of a business start-up or new regional office. Flexible workspaces allow the option to scale up when required. This distinguishes themselves from traditional office spaces. The flexible workspace industry in the Asia Pacific is expanding rapidly compared to the rest of the world.
Flexible workspace providers in the SEA region are aggressively opening more sites. They are leasing larger spaces and expanding their foothold. From 2014 to 2017, flexible workspace inventory across the region recorded a compound annual growth rate of 35.7% in the Asia Pacific. This is much higher than in the United States (25.7%) and Europe (21.6%) over the same period. The flexible workspace industry in SEA leased more than 8.0 million square feet in the last two years. Local flexible workspace providers like JustCo, EV Hive and KMC Solutions accounted for more than half of the space leased by all such operators in 2017. KMC alone has more than 50% market share of the flexible workspace industry in the Philippines. JustCo’s spaces are occupied by some of the region’s leading start-ups.
The photos below are examples of what is available in Singapore, for example – Office Hub – Club Co – The Working Capital – The Collective Works
Increasing Trend with Supply of Flexible Workspace
Jones Lang LaSalle (JLL) predicted that “the supply of flexible workspace is expected to grow in 2018 and beyond, thanks in part to the ambitions of major global and regional operators.” Such findings are in line with Singapore-based flexible workspace operator, JustCo’s recent news, where it announced that it has signed an exclusive joint venture partnership with TICON, one of Thailand’s leading property owners and developers that is majority-owned by Frasers Property. JustCo is on a quest to “become the largest flexible workspace network in Asia by 2020.” The company’s ambitious plan is to open 100 centres over the next 2 years.
Challenges of Flexible Workspaces
One of the key challenges for operators in the Asia Pacific is that the office stock is controlled by a small number of landlords. For example, in the United States, commercial holdings are much more dispersed. In the Asia Pacific markets, a handful of landlords dominate the market. What this means is that if a single landlord decides not to lease space to a particular operator, the impact to the operator will be significant. This will leave the operator with very limited options to offer sufficient inventory to potential customers. It also means that property owners and developers have enough leverage to determine the scale of the flexible workspace market. Fortunately for operators in Asia, the flexible workspace is becoming an attractive option to those looking to create active, vibrant spaces where collaboration opportunities among tenants abound.
Creating more Supply of Flexible Workspaces
Many are considering to develop these facilities on their own or in partnership with another operator” — as with the case between JustCo and TICON. JustCo’s joint venture partnership with TICON will give it an edge and advantage over the competition. This provides them with the stock and first-mover advantage into an increasingly competitive market. Yet in order to stay ahead of the game, they will need to move rapidly. JLL predicts that “join ventures of management contracts between landlords and flexible workspace operators are likely to become more common.” Joint ventures are especially attractive for flexible workspace operators seeking to expand and for investors that are interested in entering the market. JustCo’s strategic partnership will help the company leverage and tap a wider network of industries such as commercial real estate, retail, hospitality, food & beverage, and industrial customers.
Mike Ghasemi is the founder and chief analyst of Mike Ghasemi Research Pte Ltd. He’s a retail and hospitality and travel industry futurist, analyzing trends and the use of emerging technologies to digitally transform organizations.
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