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A CUSHMAN & WAKEFIELD

RESEARCH PUBLICATION

ASIA PACIFIC
COWORKING
TRENDS
SPACE IS NOW A
BUSINESS SOLUTION

FEBRUARY 2018
A CUSHMAN & WAKEFIELD
RESEARCH PUBLICATION

Coworking: While it may have been once considered a


fad, coworking spaces that provide businesses
We at C&W are closely tracking its evolution
across Asia Pacific. We released our first report
and individuals with a shared working “Coworking: Understanding the Ongoing

Top trends environment, are proving to be a lasting trend


and demonstrating one of the biggest changes
in the workplace today. With memberships
Evolution” earlier in 2017 to discuss how
coworking, as a cost containment and flexible
workplace strategy, fits into the corporate

to watch Coworking has


growing at higher than a global average of 40%1, realm. And now, we are pleased to share
coworking operators have been an important another report that highlights emerging trends
demand catalyst across Asia Pacific. Coworking in the coworking landscape that have
taken the region
out for
has taken the region by storm, leasing more transformed it to become a business solution,
than 8.0 million square feet (sf)2 over the last not just a real estate alternative. This report

by storm
two years. Places like Ucommune, WeWork, comes against a backdrop of its rapid growth to
Spaces, Awfis, and CoWrks etc. have accounted disrupt the traditional office market across
for nearly two-thirds of the space leased by cities.
coworking operators during 2016-17.

1. 2017 Global Coworking Survey, deskmag


2. C&W Research

Coworking is ...

A breeding ground Rapidly Gaining Not a cost concern


Becoming a staple Set to blossom
Going corporate for in-house expanding into momentum in emerging
for developers in Japan
innovation hubs Southeast Asia through M&A markets
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Coworking
is going
corporate
The fast–rising demand for coworking spaces is not surprising.
Many countries are encouraging start-ups and small businesses in
a bid to offset slowing growth at traditional industries.
Coworking is an attractive option for desks, private offices and can expand THE SHARE OF
start-ups, freelancers and even to occupy one or more floors, or FREELANCERS AND
large corporates seeking an even a full building where/when
INDEPENDENT
alternative, activity–based workplace required. In fact, some operators
to nurture employee talent and are also ready to build and operate WORKERS HAS
further business growth. It offers a shared workspace on a property DROPPED BY
negligible capex requirements, that is owned by another company. NEARLY
efficient space usage, and flexibility For example, a corporate campus

15%
to expand or contract at a short or a headquarters can bring in a
notice. coworking operator to implement
Demand from corporates has been
shared working practices. over the
one of the biggest expansion drivers Coworking and Corporate Real Estate last 3
of coworking in several Asian cities (CRE) are stronger together. Going years.
over the last two years. Growing forward, coworking in workplace
demand for flexibility, collaboration strategies will continue to gain
and culture that a shared working traction on the back of growing
environment could bring in are corporate demand. We all know that
encouraging corporate occupiers to cost containment remains the primary
actively consider it. After all, they focus for CREs during periods of
have an option to scale up anytime, volatility and rising rents (across most
anywhere. As such, memberships of gateway markets in Asia Pacific).
enterprise clients (companies with Given this, more corporate occupiers
workforce higher than 500) have will embrace flexible working
Demand from
more than doubled over the last 12 arrangements, especially coworking
corporate
months. The share of freelancers and spaces. This has already been the
occupiers has
independent workers has dropped by trend in more popular industries such
been one of
nearly 15% over the last 3 years3. as professional services, technology
the biggest
and banking, financial services and
Even small and medium sized expansion
insurance (BFSI), which are major
companies (workforce less than drivers of
drivers of office activity in the region.
100 employees) are adopting it as coworking in
landlords and coworking operators several Asian
are luring them to expand their cities over the
customer base. Occupiers have the last two years
flexibility to customize as needed.
They can begin with hot/dedicated

3. C&W Research

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RESEARCH PUBLICATION

Developers are
making coworking
spaces a staple
Across the region, some landlords, concept’s potential by coming up
either by themselves or by partnering with their own brands. CoWrks is
with an operator, are embracing owned by Indian developer RMZ
coworking concepts to give life to Corp., while in Singapore, Collision 8
their buildings and help incubate is owned by Aurum Land Private
firms that eventually will lease office Limited. Soho China is in fact
space at their properties. By offering expanding its 3Q brand in China’s tier
space in a building or the campus, 2 cities. Ayala Land has launched its
they can provide coworking players coworking brand ‘Clock In’ in Makati
an ecosystem which places members City (Manila) earlier in 2017.
at the heart of the action. Coworking
The coworking landscape is still
operators get access to a larger
evolving following the big merge
campus and client network, as well
with CRE over the last few years.
as access to outdoor event spaces,
Occupiers are adopting practices
fitness centers, health clubs, and retail
that work for them and are not
spaces.
shying away from experimenting
Some of the widely known examples with multiple options. Developers
include WeWork-Embassy Group are also trying to create a social
(India), Ucommune-CapitaLand environment that they want, hoping it
Developers are (Singapore) and Ucommune- would be a strong selling factor. They
also trying to Vanke (China). CapitalLand tied have resources and valuable assets
create a social up with Collective Works to form in hand, and are ready to explore
environment a joint venture. While developers opportunities that will transform how
that occupiers invest in real estate, coworking occupiers would consume space. As
want, hoping players, in exchange for such, growing competition among
it would be a management fee and a slice of the landlords will intensify proliferation
strong selling profits, provide the design, of coworking spaces and eventually
factor. technology and training. In some make such offerings a standard.
cases, developers are tapping the

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RESEARCH PUBLICATION

Coworking
spaces are Start-up
communities and
coworking spaces

becoming will positively


impact local
economies by

in-house
creating a wider
variety of jobs.

innovation coworking facilities to innovate


and experiment through in-house
For occupiers who wish to be prudent
on costs and are committed to

hubs
collaboration using incubators flexible working practices over a long
and accelerator programs for term, implementing coworking in-
start–ups. Some examples are house makes perfect sense. Though
Unilever’s Level 3, a 22,000 sf space branded as start-up hubs or
located at its regional headquarters accelerators, they provide parent
in Mapletree Business City, Singapore. companies and start-ups access to
Level 3 is not only a space for state of the art facilities, meeting
startups to park their belongings rooms, break-out areas and
The lifespan of large and successful How do coworking facilities fit
and base their operations, but also networking events that are common
companies, especially those in the into this whole scenario? This is
for Unilever teams to visit the space at regular coworking facilities. They
Fortune 500 list, is getting shorter where companies are working
easily and connect with companies can also be a great source of talent
every year as only 12% of those with techies, entrepreneurs and
and ideas they find interesting. when companies are hiring.
companies have survived between creatives and are building start-up
1955 and 20164. Creative destruction community connections to come Some examples in the financial The financial sector has been quick
and market disruption are driving up with new ideas that they can sector include the Vault by DBS, a to adopt this but other industries,
them out of business as they lack scale up and convert to a business dedicated 5,000 sf open plan and especially tech, professional services
the dynamism and innovation that solution. Companies like Google are multifunctional facility in Hong Kong, and engineering, are slowly catching
The financial
are crucial for survival in a hyper- associating with startup communities/ LumenLab, a 7,800 sf innovation up. Many are experimenting with
sector has been
competitive global economy. coworking operators across regions. center by MetLife in Singapore, and such plans on a smaller scale and the
quick to adopt
Thankfully, the advent of new This is mutually beneficial as Google The Open Vault, a 2,400 sf fintech trend is likely to gain momentum as
coworking to
economy and consumer-oriented supports members of such coworking innovation center by OCBC bank, companies realize the true potential
drive in-house
companies and their constant spaces by providing technical and also in Singapore. They function like of working with innovative and
innovation but
hunger for innovation to come business support, and infrastructure coworking spaces and work with product-ready start-ups in a shared
other industries,
up with new products have got while partnering in their success. start-ups besides being incubation working environment. Nurturing
especially tech,
everyone’s attention. Partnering Successful start-ups can expand hubs themselves. Their proximity to new ideas and experimenting with
professional
with entrepreneurial organizations, their business and create new jobs, parent organizations is purposely multiple start-up communities and
services and
networking, sponsoring and eventually growing multifold. designed to share the energy and entrepreneurs have become critical
engineering, are
supporting innovation has never buzz of the open and collaborative for companies that are willing to
Start-up communities and coworking slowly catching
been more advantageous to bigger environment, as well as provide break down silos and are ready to
spaces will positively impact local up.
companies. access to more resources, proven target innovation-led longevity and
economies by creating a wider
processes, and a culture of innovation. sustainability.
variety of jobs. Interestingly, some
corporations are starting their own

4. Fortune 500 firms 1955 v. 2016, Mark J. Perry, AEIDEAS, Dec 13, 2016

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Aggregation:
M&A is gaining
Coworking
in Japan: momentum
Coworking operators are merging India, amongst others. Meanwhile,

Better with each other and scouting for


investors in a bid to strengthen their
foothold in growing markets. These
WeWork has acquired Singapore’s
Spacemob to support its aggressive
expansion plans in Southeast Asia

late than
partnerships have been popular in while also working with Softbank
accelerating entry and expansion, to expand in Japan. It also bought
as companies are able to learn from Meetup, a social networking service

never
mature operating models and provide recently to further strengthen service
extensive services to tenants. offerings and target new customers.
Mergers and raising funds have We expect mergers and acquisition
become a common practice in the (M&A) deals and funding rounds to
Coworking is still nascent in Tokyo region as operators are gearing pick up pace in 2018 as competition
with the smallest number of up to enter new markets, fend off heats up in the region. Local players
operators among developed markets competition and trying to thwart are eager to expand their reach and
small-scale, local operators but
in the region. This is not really a WeWork’s aggressive expansion plans in some cases, are struggling hard to
none of them have gotten the brand
surprise as the norm in Japanese in the region. Some of the notable stay afloat. They are in desperate
recognition to scale up and attract
culture has been to seek corporate mergers include EV Hive with need of financial and operational
larger corporate occupiers; mostly
employment rather than embark 2018 will be Calpham Collective and Ucommune backup from bigger operators. The
serving workers and freelancers
on entrepreneurial pursuits. But transformational with New Space. At more than US$ coworking vertical is getting crowded
that are extremely cost-conscious.
times are changing. The number for the coworking 300 million6, equity financing in every year and only a handful of
However, the entry of WeWork will
of entrepreneurs, freelancers, and landscape in coworking startups is already at a players with bigger reach and
certainly turbocharge the coworking
other workers pursuing independent Tokyo. record high in 2017. Ucommune has financial wherewithal can survive in
sector as corporates are now
income now exceeds 11.0 million5 raised funds from Aikang group in the longer run.
increasingly embracing its use.
people in Japan. This is up by a China, Catcha Group has backed
quarter from just two years earlier While Japanese companies are very Common Ground in Malaysia, Sequoia
and totals nearly one-fifth of the total cautious around new concepts, Capital invested in Awfis in
workforce. they are recognizing that there is
latent demand for coworking. Local AT MORE
The growth of freelancing is much
developers seem to have realized THAN
quicker in Japan as compared to
its potential too. Mitsui Fudosan’s 31
other developed markets such as the
Ventures, Mitsubishi Estate’s FinoLabs
USA, UK and Germany. Freelancers
and Mori Building’s Ignition Lab MIRAI US$
tend to survive longer and make up
for more than half of all coworking
are some examples where developers
are trying to make a mark. As such, 300
members in the country. A majority
of coworking members are also from
competition is likely to intensify with million
global players entering the market.
the tech and services industries
2018 will be transformational for the
where collaboration is critical and equity financings in
coworking landscape in Tokyo, where
shared workspace adoption rates are coworking startups
we can see some reputable entrants
relatively higher. are already at a
that are well established in other
record high in 2017
Coworking is not new to Tokyo’s markets. Watch this space as it can
office market. There are several only get better in 2018.

6. Co-working space operators in Asia chase alliances, funding as WeWork expands, Deal Street Asia,
5. Can Japan, land of lifetime employment, handle the rise of freelancers? The Japan Times, May 14, 2017 July 26, 2017

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Coworking
expands into
Southeast Asia
The new battleground for coworking clout is now in
Southeast Asia, which is among the world’s fastest
growing economies, and boasts a very tech–savvy
population.
The start-up ecosystem in the The battle In Vietnam, private equity firm
sub-region is fairly young and for coworking Indochina Capital has invested in
the markets are diverse. As such, dominance will Toong, which is associated with
freelancers and entrepreneurs are
in dire need of partnerships and
get serious in CapitaLand, to develop coworking
spaces in Ho Chi Minh City. Indonesia’s
networking opportunities that
coworking spaces can provide. From
2018 Rework has received funding from
ATM Capital and Convergence
Kuala Lumpur (KL) to Manila, Ho Chi ventures recently. EV Hive, one of the
Minh City and Jakarta, innovation major coworking players in Jakarta
hubs and start-up incubators are has merged with Clapham Collective
growing with government support to expand its reach.
and funding activity. A flourishing
The start-up boom and enormous
start-up ecosystem across these The start-up business potential are attracting some
markets is accelerating the evolution
of the shared working environment in
boom and established coworking operators
enormous to the region. WeWork has already
Southeast Asia.
signaled its plans by acquiring
Local operators that are still in the business Spacemob. JustCo, a popular
early stages dominate the coworking potential are Singapore coworking operator has
landscape. They are small, mostly recently secured funds (of about US$
confined to their home country and attracting 12 million7) to support its expansion
are heavily dependent on external some plans in Southeast Asia. Impact Hub,
sources. They are on the constant established another major global operator, is
lookout for funding opportunities already stationed in Jakarta, Manila
to expand reach. Catcha Group coworking and Kuala Lumpur. Ucommune, a
backed Common Ground has operators to major Chinese coworking player is also
expanded to five facilities to become eyeing Southeast Asia. As such, the
the largest coworking operator in KL. Southeast battle for coworking dominance will
Worq, another coworking space in KL Asia. further intensify in 2018.
has also raised funds from multiple
investors in 2017.

7. Co-working startup JustCo raises $12m from Thai property developer, Deal Street Asia, October 13, 2017

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Conclusion
Coworking Costs: By successfully commercializing the
concept of the shared office workspace,

Not a factor
coworking has revolutionized the
commercial real estate market. Its
flexibility, negligible capex costs and

in emerging
promises of increased collaboration
and networking benefits have firmly
etched the concept into corporate real
estate strategy. While it is not expected

markets to entirely displace conventional office


spaces as we know it, generation shifts
and the changing nature of work will
continue to sustain this proliferation

Coworking offers flexibility. However, surprisingly, the


take–up levels are quite encouraging.
Corporate that we are now witnessing. Arguably,
the biggest challenge to occupiers
cost arbitrage in In markets like Bengaluru, Mumbai, occupiers now is how to incorporate this concept
into their overall workplace strategies
some markets. It is Gurgaon, Hyderabad and Manila etc.,
corporates such as Accenture, are using and define their use so that it sits
seamlessly within the company’s DNA.
a cheaper solution Amazon, GE, Boeing, Alibaba, Ikea,
HSBC, PayPal, Verizon and Microsoft
coworking Coworking spaces are also increasingly
perceived as a strategic necessity by
compared to etc. are occupying a major share of
coworking space. For most corporate
facilities landlords and investors, which can be

traditional office occupiers, coworking has become as “swing bundled as a sweetener in leases and an
invaluable element in value-add or asset
a business solution, not just a real
space in several estate alternative. spaces” to repositioning strategies.

gateway cities. deal with


Many are using such facilities
as “swing spaces” to deal with business
For example, coworking is a viable relocations, expansions and/or
option in high cost locations such consolidations. Short-term flexible requirements.
as Singapore, Hong Kong, Sydney, leases are gaining popularity among
Tokyo, and Beijing. In the case of occupiers in emerging markets where
India and emerging markets in construction delays are a routine.
Southeast Asia, coworking options For all short-term requirements,
are pricier compared to traditional companies are increasingly using
office spaces, as majority of them coworking facilities rather than
are located in expensive locations shared service offices/business
and in several cases, office centers. As such, we expect the trend
vacancies are tight. Moreover, to gain momentum, as coworking
coworking operators can get away operators expand and enter into new
with providing smaller spaces markets in 2018.
(about 50-60 sf per person) by
creatively adopting workplace
strategies and offering greater

14 ASIA PACIFIC COWORKING TRENDS 15


For more information about Cushman & Wakefield For all occupier related requirements across
Research or this report, please contact: Asia Pacific, please contact:

SIGRID G. ZIALCITA CHRIS BROWNE


Managing Director Managing Director
Research and Investment Strategy, Asia Pacific Global Occupier Services
+65 6232 0875 Asia Pacific & Greater China
sigrid.zialcita@cushwake.com +65 6232 0828
chris.browne@cushwake.com

KAPIL KANALA
Associate Director CHUA MING LEE
Occupier Research and Forecasting, Asia Pacific Head, Account Management
+91 40 4040 5555 & Service Lines
kapil.kanala@cushwake.com Global Occupier Services
+65 6232 0859
minglee.Chua@cushwake.com
WYAIKAY LAI
Associate Director
Research & Investment Strategy, Asia Pacific
+65 6232 0864
wyaikay.lai@ap.cushwake.com

About Cushman & Wakefield

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