In October last year, Knight Frank reported that Hong Kong’s political instability inspired contingency plans by multinationals. Many opted to rent serviced offices in non-core business districts. In January, Cushman & Wakefield reported major office occupiers were committed to reducing office costs through various measures. In May, Colliers International stated that rental rate growth and lack of stock are — as predicted — pushing companies to non-core locations. Those combined factors are increasingly making serviced offices the solution to office needs.
Just Like Home
Hong Kong knows all about serviced apartments. Hundreds of operators offer all-inclusive homes at weekly and monthly rates; more and more offer day rates. Serviced offices are not much different, except instead of a bed and saucepans, tenants get a desk and fax machine. “We offer flexible working solutions for any type of business,” states Michael Ormiston, country manager for serviced office operator Regus in Hong Kong in defining the concept. “Our customer base is anything from a start-up all the way to Fortune 500 companies. There isn’t really a typical customer but I think the reasons they use us are quite common.”
At the most basic, a serviced office supplies the same infrastructure of a so-called normal office, including faxing, copying and binding services, boardrooms, Internet, private office space and cleaning services. Depending on the operator and package, rent can also include a postal address and telephone services. Regus, for one, offers a range of products, from traditional monthly rental to day offices suited to frequent travellers. Regus’ Businessworld grants access to its 3,000 business lounges worldwide (including 20 in Hong Kong) for members who need a office to drop into from time to time, or city to city. That dovetails with changing work dynamics and taps a “work” psychology business travellers may need; hotels can be distractions. In addition to Regus, Compass, Servcorp, and The Executive Centre are just a few of the global operators with properties in prime districts like Central, Admiralty and TST. They’re also heeding demand and opening in decentralised locations like Kwun Tong. The draws are myriad claims Ormiston.
“The first [factor] is lower set-up costs. If you’re looking at a serviced office you can move in today. All you need is your laptop,” he explains. There are no moving, fit-out and design costs, and no demanding lease terms. “Flexibility is important and it allows companies to hold on to more of their cash.” Serviced offices are almost economy-proof too. During boom cycles start-ups and expansions dominate the sector. During busts, it’s flooded with companies looking to save money and limit risks. Another draw is all-inclusive rental fees that eliminate time-consuming day-to-day details or a dozen monthly invoices. “It’s easy for you to manage your business; you don’t need to deal with a bunch of suppliers. It’s one invoice and allows you as a business to work on your business,” Ormiston continues. Finally, that flexibility influences expansion too. It’s easier to grow from two, to four, to eight in a serviced environment. Tenants neither have to pay for unused space nor scramble to find more when the time comes.
Though last autumn’s spike could be credited to the Occupy movement, Knight Frank Director and Head of Research & Consultancy, Greater China David Ji doesn’t see it as a blip. “Serviced offices continued to expand aggressively in the past few months. Many new business start-ups are opting for serviced offices over traditional spaces, as they offer more flexible rental terms,” he says, echoing Ormiston. New businesses typically demand less space, are happy in non-core sites and are willing to adopt “Alternative Workplace Strategies” to reduce reliance on office space. “With small companies remaining one of the major drivers of office take-up, we expect demand for affordable serviced offices to continue,” says Ji.
Apples and Oranges
Traditional serviced offices aren’t the only product on the market for individuals and SMEs looking for alternatives to pricey office space. Shared offices — or co-working spaces — are on the rise, and they’re designed to appeal to modern industries. Most are ultra-digital, cool, tend toward the Google aesthetic and are proliferating in Hong Kong: Innovation Lab, Wynd, the Hive, Garage, The Loft, Cocoon and Hong Kong Commons in locations like Sheung Wan, Kennedy Town, San Po Kong and indeed Central are just a few.
Ormiston agrees co-working has its appeal, but believes the two are more alike than not. “I would agree that the environments are a little bit different, but with our global experience we try to create products that are diversified. We also have co-working space,” he admits, adding that eventually “cool” doesn’t necessarily cut it. “I’ve noticed some of these [shared spaces] are starting to convert some of their space into private offices. After people establish themselves more in their business they need more of an enclosed environment. We have both so you can move from one to the other. They can complement each other.”
Corporate culture and demographics are changing, and could theoretically lead to a major shift in office standards. So are shared offices the wave of the future? “No,” states Ji. “Shared offices refer to a landlord letting an office to multiple tenants or a major tenant sub-let part of its office space to others. This is not common, while [the] serviced office is a well-established mode of office leasing in Hong Kong.”
One of the most prominent shared offices so far is Swire’s blueprint, downstairs from its IT start-up facilitator in Cornwall House. But Ji sees it as a work and event space designed to “unite people around a shared interest in tech and serve as a platform for the exchange of inspiring ideas.” Sure enough, many shared offices have similar like-minded entrepreneurs: the Hive focuses on the creative industries, the Crafties to arts and crafts. Ultimately, says Ji, “It is not a long-term serviced office business and will not pose significant competition to serviced office operators.”