Co-working: Will it take off in Asia

Co-working is the new buzzword in Singapore - but how will it take off? That is a question many have asked. I personally feel that co-working will undoubtedly become part of the office landscape in Singapore as emerging models of business and new ways of working evolve in the knowledge economy.

15 Apr 2016

By Peter Andrew

coworking will it take off in asia
Co-working is the new buzzword in Singapore - but how will it take off? That is a question many have asked. I personally feel that co-working will undoubtedly become part of the office landscape in Singapore as emerging models of business and new ways of working evolve in the knowledge economy. Whilst co-working centres were traditionally the domain of co-working operators, we are seeing increased interest by building owners and investors to either partner with operators or even establish their own solutions. Flexible co-working space is seen as a complementary partner to traditional leases enabling landlords to create new leasing models and small niche businesses to partner with major tenants.

Co-working has its beginnings in the gentlemen business clubs in London and later caught on in Netherlands and the Americas. It was the forerunner to the co-working space that we know today - an emerging short term quick fix solution to start ups with limited capital who need a physical working space to test out their business. Instead of long contractual rental agreements, start-ups can pay a daily rate or join as members on a term basis ranging from one month to a year, and this seems to be catching on. Co-working spaces appear to be doubling every year in newer markets in Australia and tier 1 cities of China, in Shanghai, Beijing and Tokyo.

Co-working is more than a workspace model though - you can see new business models emerging from them. Venture capitalists are establishing their own co-working centres in the hope that they connect directly with young talents and start-ups. They offer mentoring to those businesses and it in turn creates business investment opportunities for them. Banks and other major service providers carve out co-working spaces which business customers can use for free in exchange. All of this is an opportunity to build stronger partner relationships with customers. In turn, service providers are able to connect with clients at a whole different level, and in the process build brand affinity, win them over and retain them.

There are two characteristics of co-working that are important to understand. Firstly they are all about the experience - they have to offer a competitive alternative to other places of work where a highly mobile person could potentially go, like a local Starbucks for example. Co-working spaces are therefore cool! But a specific kind of cool because the other key attribute is that they often focus on communities of interest - specific industry sectors. We’re moving into an age where people don't work for a big corporation anymore, instead co-working centres are gaining popularity as “the place” where people of like interest gather - to learn from each other, share ideas and potentially create businesses together. It is this type of synergistic energy that allows industries to evolve from small single sector focused facilities, into larger facilities that cater for a variety of industry types - almost like a shopping mall of alternative 'working zones' that are industry focused. You might see app developers on one level, recording industry companies on another, legal services yet another - and like-minded co-working tenants plugging into the whole web of services, moving in and out of different levels. Hospitality, F&B and curated experiences can then be integrated to create a lifestyle experience. Australian developer Lend Lease is leading the way with a mixed development in Barangoo where the attraction of major tenants with flexible (anyone can sit anywhere) workplaces means that the whole urban environment in and around the new office precinct has been designed as a place of work. Co-working centres are an important part of that urbanisation of work.

There is however, a limit to the size of a company that can use a co-working centre, although this number is much higher than one would expect. Co-working centres in the US are reporting that organisations as large as 40 people are modelling their offices after co-working centres, and in some cases, co-working centres are becoming anchor tenants in major developments. Major corporations also use these types of arrangements on on a temporary basis to inject 'a bit of excitement and creative thinking' into project teams. On the other hand, for a growing company, building a strong and unique culture can be important and co-working centres at present struggle to support this. Start-ups who eventually evolve into a 40-member outfit will want to establish a unique company culture, and that usually entails establishing a physical space they can call their own, where the office environment is curated to give members a sense of belonging and identity.

A sense of belonging and identity is something crucial, even for millennials, according to a CBRE-Genessis survey of young professionals. These millennials were interviewed on what they felt were important in the workplace of the future, and although a collaborative physical environment where like-minded individuals come together and is a priority, co-working spaces are unable to give them a clear sense of identity. For this reason, many organizations will still prefer to remain part of the larger office scheme.

In Singapore, about two percent of the total office space is now allocated to co-working spaces. This seems like a small number but it is actually very significant. The extent to which co working spaces will grow in Singapore depends, to a large extent, on the pace at which entrepreneurs can create the right business and service models. For now, co-working will be good way for developers to re-position old buildings; to re-use buildings to hedge against rental volatility.

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