(Edited News Release)
Demand for flexible offices—including co-working spaces and serviced offices—is growing faster in Asia-Pacific than anywhere else in the world, according to new research by real estate professional services and investment management firm JLL. The region’s stock of flexible floor space is growing at 35.7% per year compared to 25.7% in the US and 21.6% in Europe.
The report, which looks at major co-working and serviced office operators in 12 Asia Pacific markets, reveals that the number of major flexible space operators has doubled, while flexible floor space has increased by 150% between 2014 and 2017.
“By 2030, flexible workspaces could comprise 30% of corporate commercial property portfolios worldwide,” says Jeremy Sheldon, Managing Director, Markets & Integrated Portfolio Services, JLL Asia Pacific. “Although corporate adoption is still in its early days, there are certain factors that will continue to make this region a hot spot for co-working growth.”
A key driver, according to the report, is that governments are encouraging entrepreneurship to offset the slow growth in traditional industries such as manufacturing and are offering financial resources and backing for small companies, many of whom locate in co-working style spaces.
Another reason for the rise in corporate demand for these spaces is the plug-and-play simplicity it offers, particularly for larger companies. The ability to move in and out of an office at short notice and avoid complicated contract negotiations and fit-out work is a convenient option for many occupiers.
At the same time, businesses are looking to encourage collaboration among employees and are using shared workspaces as a way to foster innovation through exposure to new ideas and ways of working.
“Some companies have even started their own internal co-working facilities or have incorporated certain features unique to flexible spaces to make the work environment more engaging. This includes activities and amenities to enhance member well-being and promote social and business networking like yoga classes, guest speakers, free lunches and after-work drinks. This helps build a community feel and can be a differentiator when it comes to attracting and retaining young talent,” says Susan Sutherland, Head of Corporate Solutions Research, JLL Asia Pacific.
Metro Manila builds more flexible office spaces
In Metro Manila, JLL estimates that at least 2,000 new seats from flexible office spaces were completed annually between 2014 and 2017 according to JLL Philippines Head of Research and Consulting Janlo de los Reyes.
Makati and BGC have been identified as the most preferred locations for flexible workspaces owing to the agglomeration of businesses in these districts. Lizanne Tan, JLL Philippines’ Head of Tenant Representation, says: “Although the growth for flexible/co-working spaces is primarily in Makati and BGC, we also noticed a growing demand in the Ortigas and Alabang area, though not at the same scale and pace.”
De los Reyes pinpoints start-ups and smaller enterprises comprised of both corporate and IT firms as the number one tenants of these new office models. “Close on their heels are BPO and corporate occupiers for temporary or swing space.”
However, there remain some barriers to the widespread use of flexible space. Large corporates place a high value on retaining their brand identity and culture as well as the need to protect data and secure their IT infrastructures.
Implications for real estate investors
In response to growing demand, JLL notes that landlords will continue to form joint ventures with co-working operators or create their own flexible spaces to meet tenants’ needs. Meanwhile, developers are adapting to what could be a new standard in property development whereby flexible workspace will be an amenity as essential in a commercial building as food and beverage outlets or a gym.
“Given the competitive dynamic of this new sector, we are already seeing consolidation even among the biggest players. Looking ahead, we can expect convergence to continue growing, with serviced office operators developing co-working brands and co-working brands targeting the clients of serviced operators in the market,” Sutherland concludes.
For more information, download ‘Spotting the Opportunities: Flexible Space in Asia Pacific’ now.