New work order

Spaces Tokyo Otemachi Building

In December of last year, American co-working behemoth WeWork leased nearly 300,000 square feet in the Shanghai China Overseas International Center — WeWork’s biggest transaction in Asia Pacific to date. The co-working “trend” that blossomed a few years ago is now less a trend as a new paradigm. The fact that Shanghai’s biggest lessee of the year was a co-working tenant doesn’t surprise Eddie Ng, transacting agency JLL’s managing director of Shanghai and East China, given the flexibility and innovation co-working tenants offer MNCs. “In the past year, our team has assisted co-working operators in leasing a total gross floor area of more than 70,000 square metres in the city, and we are confident this will continue to be the key trend in the coming year,” said Ng.

Here to Stay

Research by JLL indicates worldwide co-working locations will have 3.8 million tenants by 2020, with advantages for traditional employers that include an image as an engaging, hip company. Colliers International’s 2018 Hong Kong Market Outlook stressed decentralisation and flexible workspace options as the year’s key commercial drivers. Co-working operators were 2017’s largest leasing actors, and landlords are using co-working to rebrand their properties. “As [co-working] has become more mainstream as an industry, we’re being contacted by more property owners asking us how we can help them access this demand,” notes Nigel Barnes, IWG vice president for development in Asia Pacific.

That’s a marked change from just a few years ago, when landlords were sceptical of co-working tenants. “We expect new players with different backgrounds to enter the market, for example Tencent will open its first Makerspace in 2018 to accommodate 200 start-ups. The government has also thrown its weight behind co-working spaces to recharge Hong Kong's economic future. With a growing start-up community, demand for incubation and co-working spaces should increase,” said Colliers Research Director Daniel Shih. 

Spaces Lee Garden rendering seating

Competition will be fierce in an increasingly crowded landscape, as operators also realise how underserviced Hong Kong’s co-working sector is. As of the third quarter of 2017, Hong Kong was home to roughly 60 co-working operators—compared to 330 in New York and over 1,100 in London. Additionally, of total commercial space globally, co-working operators currently occupy only 1%. There’s room to grow—even if questions of sustainability linger.

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In November The Executive Centre’s CEO Paul Salnikow told the SCMP the co-working sector in Asia was already oversupplied, and that, “Regardless of the advertised vibe when you visit them, many are mostly empty.” Co-working’s viability is also questionable considering that during an economic downturn, smaller tenants will simply go back to the proverbial family basement and continue their start-ups there. 

“It’s not sustainable for everyone, but I think scale matters, and we’ve got scale. The industry has certainly moved out of the
shadows, and that’s good for everyone,” theorises Henry Saliba, serviced office operator IWG's Managing Director Corporate Development APAC, Middle East& Africa. Saliba likens the emergence co-working to that of smartphones: now that we have them we can’t imagine living without them. On a more practical level, Saliba argues that not only is co-working’s share of the commercial pie tiny, it’s about real estate — and not really the bubble-prone tech play it’s sold as. “While these open co-working elements are a big part of [the product], 80% of the asset is still office space. That’s how most people still prefer to work.” Down the road, flexibility, connectivity, and the luxury to have some fun at work will prevail, and “[Co-working] enables it, so I don’t see this as going away at all,” finishes Saliba.

Spaces for All

Spaces Melbourne Richmond

Come mid-2018, Sun House on Connaught Road will become the flagship for one of the SAR’s newest co-working operators, which was also, not surprisingly, among the largest leasing transactions in Central in 2017. Spaces leased the entire 77,000-square-foot building, and also took up an innovative 40,000 square feet in Lee Garden Three in Causeway Bay.

Founded in Amsterdam in 2006, Spaces (now part of IWG, formerly Regus) currently has offices in 80 cities, including London, Rome, Toronto, Sydney, Tokyo, Sao Paulo, and Johannesburg, and tenants that include Uber, PayPal, GoPro, and several high profile blue chip tenants that demand discretion as a few. With plans to have 250 locations by the end of 2018, and 500 by 2019, Spaces—and Regus—don’t see demand waning. 

“We don’t like to call it a new way of working. We’re working in a new world,” says Margot van der Poel, Spaces’ brand manager for the Middle East and Asia Pacific. As van der Poel sees it, form follows function, and the attitude towards working is what created and will maintain co-working. “When we first opened in 2008, people would ask, ‘Why would you offer a full ground floor dedicated to open space where you could put offices to maximise the use of space?’ It’s so easy to connect online there’s a bigger hunger to connect offline. We look at bringing value to the workplace in a different way.”

Spaces Lee Garden rendering workspace

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Regus purchased Spaces as a way to provide a product it was seeing increasing demand for, that fit its multi-brand strategy, would complement the infrastructure Regus’ had developed over 30 years, and was pioneering in the sector. “In Singapore, for example, we’ve seen demand jump by 20% in the last 12 months. That is a huge surge, so clearly demand is there to expand our offering,” explains Barnes. “We had 29 Regus locations, but in isolation [Spaces] was extremely popular…It provided something we didn’t have—whether demand is for geography, whether it is price point, or a desire for another work style.”

Spaces plans on setting itself apart by combining classical co-working sociability with professionalism; suits and sneakers are both welcome but ultimately it’s still a place to work. Van der Poel says tenants can expect a European-flavoured environment that must be experienced to be fully understood. “Every location has its style, and design decisions depend on the building. Lee Garden and Sun House are going to have different set-ups while still following the Spaces concept.” In addition, Spaces users will be able to leverage IWG’s extensive network and take advantage of industrial diversity at each location. “We see many tenants using more than one location,” adds van der Poel. “Rather than placing specific companies and industries together, we welcome a mix that enforces a diverse community.”