Large Corporations Driving Demand for Co-Working Space
Large Corporations Driving Demand for Co-Working Space
September 4, 2017
Domestic Operators Dominate Asia Pacific Market Share; Flexible Working Provides Innovative Platform for MNCs and Start-ups to Integrate
Hong Kong, July 26, 2017– Multinationals and top-tier local corporations in Asia Pacific will look to build more flexibility into their corporate real estate portfolios. According to CBRE, flexible working strategies, including co-working spaces, now play a key role in facilitating interaction between large corporations and start-ups, standing at the forefront of the evolution of a new business eco-system.
“Workplace flexibility remains a fairly niche concept for many large corporations in Asia Pacific, but occupier attitudes are changing meaningfully,” saidManish Kashyap, Regional Managing Director and Head of Advisory & Transaction Services, CBRE Asia Pacific. “As economies continue to evolve, and interaction between established corporations and start-ups shape a new normal, agile workplace concepts like co-working will gain increasing traction in Asia Pacific.”
In CBRE’sAsia Pacific’s 2017 Occupier Survey, findings revealed that 64% of multinational occupiers plan to use some form of third party office solutions, including co-working space, as an extended resource to their conventional corporate real estate portfolios by 2020. Cost savings was cited as a driver, followed by leasing flexibility, collaboration and flexibility.
Additionally, co-working space presents a major opportunity for large corporations to leverage on new ideas, and embrace innovation and entrepreneurship, whilst also becoming fertile ground for recruiting new staff directly from start-ups.
“Co-working centers now play host to a variety of end users who can leverage this product to access a range of benefits including community, business development, capital funding and the flexible use of space. Additionally, established companies including multinationals can get exposure to start-ups, investment opportunities and an emerging talent pool” saidPaul Hubbard-Brown, Executive Director, Advisory & Transaction Services | Occupier, CBRE Asia Pacific.
Factors driving multinationals’ use of third-party space
Source: CBRE Research Asia Pacific Occupier Survey, 2017
Primarily targeted at start-ups and independent contractors, multinationals are now emerging users of co-working space. Across Asia Pacific, several high profile transactions involving large occupiers committing to space in co-working centers, either in the form of enclosed offices or on designated floors, have been completed recently.
Approximately 50 new co-working centers have opened in gateway cities of Hong Kong, Singapore, Shanghai and Sydney over the past year. Over the past 18 months, co-working operators have leased over 2.5 million sq. ft. of space in key cities across Asia Pacific. Emerging Asian markets, however, such as China, India and Southeast Asia, are now the main drivers of growth.
“Emerging Asia is now at the forefront of co-working space regionally and poised to facilitate the next phase of growth. In India, leasing activity by shared office operators has more than tripled in 2016 compared to 2014. Elsewhere, in China, the growth of co-working space is being supported by government policies to promote entrepreneurship,” saidAda Choi, Senior Director of Research, CBRE Asia Pacific.
As co-working space continues to grow, the sector is naturally seeing an emergence of new operators, which include a large number of single facility co-working centers run by entrepreneurs or start-ups. However, whilst international co-working operators continue to expand aggressively in Asia Pacific, domestic operators expanding in their home markets are currently dominating the market share.
In China, India and Southeast Asia (excluding Singapore), domestic operators represent 80-90% of the market by number of centers. Even though major gateway cities such as Singapore and Hong Kong have a higher representation of international operators, domestic groups still account for around 60-70% of the market.
Looking ahead, for large Asian operators who have already established a presence in their home country, cross-border expansion will be in the pipeline as they seek out new markets. On the other hand, for smaller co-working space operators, CBRE believes this sector will likely see consolidation and merger & acquisition activity in the next couple of years.
“Co-working operators that will adapt successfully are those who best understand occupier needs, factoring them into the design, culture, experience and workplace strategy of their centers. In reality, the future of this model will rely on anticipating customers’ needs and expanding the relationship with a mixture of new and established occupiers,” saidMr Hubbard-Brown.
From a landlord’s perspective, adding co-working space to office buildings can help enhance the occupancy of spare floors or older space, whilst those who have yet to launch their own co-working business must still be prepared to accommodate co-working centres as tenants. CBRE advises landlords to closely examine how leasing terms with co-working operators are structured, whether by engaging in profit-sharing agreements or paying market rents.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.