Multinational companies are beginning to discover the appeal of co-working spaces as a flexible office solution.
The future of work is evolving. Companies aspire to have smarter workplace design which can provide the flexibility to attract and retain talent and help increase productivity. Are co-working spaces the solution businesses have been looking for, or an expanding bubble that is going to burst?
The co-working footprint in Hong Kong will continue to grow in 2018 as businesses consider new ways to manage their real estate. This opens the door for co-working providers to attract multinational companies into flexible and creative spaces. Real estate is typically the second largest operating expense to a company, excluding staff wages. Co-working providers can offer a tailor-made office solution with no upfront capital expenditure costs which address a platform of work based challenges.
Owing to the initial investment needed to set up permanent office space, self-employed entrepreneurs and small start-ups were the initial users of co-working space in Hong Kong. Recognising the unique offering of community, collaboration and higher transactional flexibility, a growing multinational client base has emerged. Co-working now boasts a range of users across different industries, a trend we expect to accelerate moving forward.
For many businesses it is critical to be in an environment that has access to start-ups and technology innovators, elements that can be found in the “community” within the co-working ecosystem. Likewise, traditional teams that are mobile on a daily basis and do not need a permanent desk can work in different locations. These businesses are attracted to a network that allows mobility throughout the city.
Relatively new in Hong Kong, the co-working trend has taken off with 560,000 square feet of providers already in operation. Year to date space leased, but not yet in operation, is equivalent to 560,000 sq ft, while an additional 550,000 sq ft is currently under negotiation. Significant institutional investment is helping to drive aggressive global expansion and new market players. But there are challenges ahead.
Several landlords have entered the market, while a handful of others are considering doing so. Office vacancy rates in Hong Kong are tight, particularly on Hong Kong Island. As a result, co-working operators face strong competition for large space from traditional occupiers and each other. We expect this trend to continue due to steady demand in the core districts.
Co-working in Hong Kong was for a time seen as filling gaps in buildings, however it is increasingly becoming an indicator of where forward-thinking businesses take up roots. Corporate real estate and portfolio strategies are increasingly looking at ways to activate and maximise space and avoid a major impact to their books. The expansion of co-working can play a significant role as companies aim to implement new working strategies and connect closer to an innovative community.