Running a business requires entrepreneurs to face a myriad of obstacles. Among them, honing a product idea, developing a business plan, forming a strong team, and also finding the perfect space wherein the business can grow. This last task has proven challenging for many entrepreneurs, especially in Southeast Asia where office vacancy rates are among the lowest in the world. These circumstances have encouraged startups and SMEs to explore options outside of conventional office leasing; thus the trend of short-term workspace solutions, particularly coworking, has taken flight in the region.
At the beginning of the year, Deskmag counted 7,800 coworking players around the world. Forecasts indicate that there will be 16,100 by year-end. The largest spaces, in terms of number of members, are located in Asia. Coworking has come a long way from the first space that opened in San Francisco back in 2005. Today, the short-term collaborative workspace solution is growing at staggering rates per annum, and Cushman & Wakefield project that it will occupy 15% of total office supply in Southeast Asia by 2030.
THE TRANSITION TOWARD FLEXIBILITY
These numbers tell us that workspace strategy is changing significantly. The advent of advancing technology, globalization, and the growth of the sharing economy have ushered in an era of increased worker mobility and preference for collaborative work environments and flexible work arrangements.
Lars Wittig, Regus’ country manager for the Philippines, concurs. As the world leader of flexible workspaces, Regus has recognized the shift in demand and has opted to embrace the growth of the sharing economy by introducing more types of workspaces including hot desks and coworking spaces in its over 3000 locations worldwide. Having seen the office market evolve over the last 5 years, Wittig is confident in Regus’ decision to adapt to these trends as “the future of workspaces.
THE SOUTHEAST ASIAN CASE
While the shift in demand towards short-term versus conventional workspaces is undeniable, the spread of coworking in Southeast Asia is only just beginning to hit its stride. Evan Moore of Hong Kong’s Urban Serviced Offices observes that as a relatively new concept on this side of the world, “coworking has proved to be popular with startups, entrepreneurs, and millennials in the region, however, there is a need to educate the market of the multiple benefits of this kind of workspace.”
Mikko Barranda of Acceler8, one of the Manila’s most innovative coworking spaces, agrees. “Coworking has barely scratched the surface in the Philippines, but it is growing rapidly. There is a lot of opportunity with the rise of millennials who want more in terms of flexibility of workspace and in terms of lifestyle.”
As a workspace concept imported from the west, coworking represents quite a drastic change from traditional Asian office set ups. In a region where one’s office has typically been privatized in order to maintain confidentiality of strategy and operations, a collaborative work environment is essentially a 180 degree turnaround. The adoption and recent multiplication of coworking spaces in Southeast Asia has been the product of global influence and local innovation.
ALL ABOUT THE TIMING
The flourishing of the coworking industry in Southeast Asia in 2016 is a strong indication that the region is ready to embrace the trends and shifting demands of the millennial generation. The launch of MaGIC, the Malaysian Global Innovation and Creativity Centre, a government-run startup incubation and acceleration centre with its own in-house coworking space, is a perfect example. Program director Jowynne Khor cites that today, attitudes have changed and infrastructure has developed enough to encourage collaboration between the government and private corporations, thereby “closing the gap” and moving the Malaysian economy forward. Khor passionately speaks about the importance of MaGIC’s open coworking floor plan at its incubation hub; she determines that the transparency and ease of collaboration between startups at all stages are integral for learning and growth.
MaGIC, Kuala LumpurAs the region’s leading online workspace marketplace and booking engine, FlySpaces has collated thorough data on the status of coworking thus far: Presently occupying 7% of the 2 million square meters of office supply in mature markets like Hong Kong and Singapore, and 3% of supply in emerging locations - coworking in Southeast Asia, given its later start, is steadily catching up with its counterpart spaces in the West. At the moment, Southeast Asian spaces are quite competitive in terms of price, with mature markets valuing each seat at an average of $500 per month, and emerging markets $200 per month. With average occupancy stacked at 90%, demand in the region has remained strong. “Because Southeast Asia includes the world’s fastest growing economies and a much more tech savvy population than other emerging regions, there is no question about the market potential found here,” says Mario Berta, CEO and Co-founder of FlySpaces.
The strong demand has undoubtedly stimulated growth and development in the industry. This is corroborated by the actions of real estate giants such as CapitaLand in Singapore and Ayala Land in Manila, restructuring their business models and expanding their property portfolios to include coworking spaces.
In the case of CapitaLand, it has entered into a joint venture with Collective Works that will support up to 250 high performance businesses in a coworking model business center of over 22 thousand square feet. “With Capital Tower’s central location, connectivity to public transport, proximity to clients and partners, premium Grade A specifications and lifestyle amenities, we are confident that the coworking space at this premium building will appeal to a range of fast-growing businesses, entrepreneurs, and freelancers seeking to rent fully functional, fitted-out office spaces under flexible lease terms” says CEO of CapitaLand Singapore, Wen Khai Meng.
In addition, WeWork - the third highest valued startup in the world ($16 billion) and the biggest name in coworking - has just moved into the region opening locations in Shanghai and Hong Kong. It stands to reason that penetration into Southeast Asia will not be far behind.
WeWork, Hong KongTHE VAST AND DIVERSE MARKET
The work setting offered by coworking is by no means exclusive or beneficial only to tech startups. The advantages reach much further than the highly rated collaborative atmosphere and professional environment - which in themselves are already valuable aspects in a workspace. Collaboration with people of different backgrounds and with businesses of different industries gives companies diverse insight, a small market to test products on, and a versatile supply of resources to tap into when support is needed. Networking is also built into the workspace! While this is indeed valuable for startups, the value extends to entrepreneurs, SMEs, and multinationals as well.
The professional work environment boasted by coworking spaces is not just for show. According to Deskmag, 71% of coworkers feel more creative and 62% see improvement in the quality of their work in coworking spaces.
In addition to these rather qualitative benefits, coworking also includes more concrete advantages which, in Southeast Asia, tend to be more effective selling points for this relatively new kind of workspace. The strongest of these concrete points is the cost saving. According to FlySpaces’ data, businesses in Southeast Asia can save 18% to 26% in a coworking space where higher rent is offset by savings on design, set-up, administration, maintenance and occupancy costs.
White Space, Kuala LumpurThe second point is flexibility - with a short-term contract, businesses are able to scale as needed. They are able to keep more efficient cash-flow and they are able to maximize the utility of space they’ve rented.
The third concrete advantage is the availability of office amenities. As new age serviced offices, coworking spaces offer all the traditional services along with a few new gadgets depending on the space. And fast internet is priority number one! As a result, all coworking experiences are plug and play experiences. Businesses only need to plug in their machinery and get started!
These workspace benefits are applicable to a wide range of businesses, including entrepreneurs, startups and SMEs that make up 95% of all businesses in the region. Adding to these market segments, there are 10 million freelancers in Southeast Asia, projected to make up 40% of the workforce by 2020. Extending past these markets, coworking has successfully begun to attract multinationals and players in the financial sector. This can be seen by HSBC’s recent acquisition of 300 seats at WeWork’s Causeway Bay location in Hong Kong.
Emergent Research ensures that growth will not be limited to the Southeast Asian region however. They estimate that 3.8 million people will be working in coworking spaces by 2020, a number quadruple the 976,000 present today.
The millennial generation has instigated a veritable shift in career perceptions and preferences. “Whereas older generations aimed to climb the corporate ladder, recent years have seen the rise of entrepreneurship - and this entrepreneurial mindset embraces the ideals of coworking because of the savings, flexibility and community” observes Gabrielle Pratte, manager of one of Manila’s biggest coworking spaces, PenBrothers.
This shift in career ideals has certainly extended to a change in preferences regarding where, when and how work gets done. Coworking is suitably positioned to address this change as a workspace that has been designed to be conducive to flexible work arrangements, and as an environment that fosters community.
OUR REGIONAL IDENTITY
Coworking players in Southeast Asia are paving their own paths incorporating some of the region’s most intrinsic values in their spaces. Wan Sing Kong explains that JustCo aims to “create an environment that promotes creativity, motivates individuals, and inspires growth.” One of its foremost priorities is to foster the size, diversity and engagement of its community. As Singapore’s largest coworking space in terms of both floor area and membership, JustCo hosts businesses of several functions and industries. “Whatever stage your business is at, help and support should be available within the community. Many companies are open to collaboration or partnership, and they will all be within reach of members of JustCo.” To facilitate engagement, JustCo holds numerous networking events; it hosts diverse workshops that are relevant to its members’ businesses; it encourages collaboration in its common spaces; and it also curates message boards and partnership or collaboration invitations on its internal app - a true example of Singaporean efficiency and effectiveness.
Hong Kong’s Urban Serviced Offices in contrast, focuses on design and sustainability, as well as health and wellness. In a city such as Hong Kong, where space is extremely valuable, Urban sees design as a core part of its business. It is essential that its space be well-designed both in terms of practicality and conduciveness to optimal working conditions. Keeping sustainability in mind, the serviced office and coworking space maintains initiatives for reuse and recycling. For its members’ health and wellness, Urban offers green tea and lemon water in its pantries; it incorporates ‘salad mondays’; it holds periodic yoga classes in its event space; and it extends gym memberships to its community. “The idea is to integrate work-life balance by bringing balance into work,” says Evan Moore.
From spaces in Singapore that host daycare services for coworking parents, to spaces in Manila that offer its members craft beers at 5pm, to spaces in Kuala Lumpur that fill its common spaces with bean bag chairs - coworking in Southeast Asia proves to be as unique and diverse as the region itself.
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