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Asia Pacific has seen the proliferation of co-working space over the past year, although it lagged behind major cities in North America and Europe, according to CBRE.
“Most co-working spaces in Asia Pacific are located in gateway cities such as Hong Kong, Singapore, Shanghai, Tokyo, Sydney and Melbourne,” it said.
CBRE revealed that Tokyo is home to roughly 100 co-working spaces, while Hong Kong, Singapore and Shanghai host 40 to 60 each.
The report attributed the growing demand for co-working space in Asia Pacific to various factors, including low costs, flexibility and the start-up boom.
Notably, start-ups are among the major users of co-working space. Singapore, for instance, saw an average of 2,000 start-ups launched every year from 2005 to 2013, while the number of start-ups in Hong Kong increased by 46 percent to 1,558 in 2015. India, on the other hand, is expected to have 11,000 start-ups by 2020.
CBRE noted that around 70 percent of co-working spaces in Asia Pacific are located in fringe or decentralised areas, where rents are cheaper, with Hong Kong and Tokyo as the two exceptions, where over 50 percent of co-working spaces in each city situated in prime areas.
“Operators in these highly location-sensitive markets are seeking to increase their appeal to users by ensuring they are near core areas with good access to transport,” it said.
With this, CBRE advises landlords to consider whether to lease space to co-working operators or develop their own co-working platform.
Leasing space to co-working operators means that landlords need not sub-divide or customise vacant floors for individual tenants.
“This is particularly attractive for landlords with underperforming, underutilised and lower efficiency office buildings. Instead of negotiating rental discounts with individual tenants, landlords can lease the space to co-working space operators under a profit-sharing model, thereby improving occupancy,” it said.
Landlords can also leverage on the expertise of co-working space operators to improve their offering to other tenants, such as by providing a wider range of amenities or building a sense of community within their buildings.
However, leasing offices to these operators means landlords lose control over end-users, which raises security concerns.
To ensure harmony with other tenants, CBRE noted that landlords should be selective towards the operators they work with.
“Landlords may consider utilising separate elevators for co-working space users and blue chip tenants to manage the flow of people, as well as increase building security,” it said.
Alternatively, landlords may establish their own co-working platforms under a separate brand name.
By setting up their own co-working spaces, landlords can build a long-term relationship with a company as it develops from a start-up to a fully-fledged corporate.
“Once start-ups grow beyond a certain size, they will require more space and privacy, meaning they may eventually commit to long-term leases for large traditional spaces.”
“At the same time, there will also be opportunities for landlords to provide co-working spaces to existing larger tenants seeking to launch new business lines; improve collaboration; and lease more flexible office space. Should landlords’ co-working platforms prove successful, they could be packaged as a REIT to raise capital,” said CBRE.
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