Grow­ing co-work­ing mar­ket bol­ster­ing of­fice rentals

The Straits Times - - BUSINESS -

Be­sides pro­vid­ing hip and cosy work lo­ca­tions, co-work­ing spa­ces are also shak­ing up the real es­tate scene by bol­ster­ing of­fice rentals.

Ag­gres­sive ex­pan­sion plans by big co-work­ing op­er­a­tors such as WeWork, along with the pro­lif­er­a­tion of bou­tique firms, have driven de­mand for of­fice spa­ces in Sin­ga­pore, strength­en­ing of­fice rentals, which rose 10 per cent last year.

Ac­cord­ing to prop­erty ser­vices provider Cush­man & Wake­field, cowork­ing spa­ces made up 21 per cent of over­all of­fice de­mand is­land­wide last year, up from 15 per cent in 2017.

The firm’s se­nior di­rec­tor and head of re­search, Ms Chris­tine Li, said that while it is hard to judge the di­rect ef­fect of co-work­ing spa­ces on of­fice rentals, it can be de­duced that rents will be pushed up when of­fice space is taken by co-work­ing op­er­a­tors, given de­mand-sup­ply logic.

“They take space off the mar­ket, usu­ally sign­ing leases for 10 to 15 years. For land­lords leas­ing out these one to two floors, they tend to be more ag­gres­sive with the re­main­ing space (in the build­ing) and hold on to the ask­ing rents.”

Ms Li said this would be so es­pe­cially for Grade A of­fices in the Cen­tral Busi­ness Dis­trict, as the up­com­ing sup­ply of of­fice space is thin.

Mr Des­mond Sim, head of re­search for Sin­ga­pore and South-east Asia at CBRE, agreed it is plau­si­ble that rental costs have been in­creased by the pres­ence of co-work­ing spa­ces, though, he said, de­mand has also been boosted by other in­dus- tries such as the grow­ing tech sec­tor.

“Co-work­ing spa­ces in the past 12 months have been a good source of de­mand for of­fice land­lords, with strong ex­pan­sion plans from the big (co-work­ing) play­ers,” he said, adding that co-work­ing spa­ces gen­er­ally pay mar­ket prices for the of­fice rentals, with ba­sic in­cen­tives sim­i­lar to those for most other ten­ants.

He agreed that the in­creased oc­cu­pancy em­bold­ens build­ing own­ers to ask for higher rents on re­main­ing units. Mr Sim said those who may be hurt are in­vestors who own strata-ti­tle space, as small firms opt for cowork­ing op­tions in­stead of longert­erm leases with such in­vestors.

Ac­cord­ing to CBRE, the co-work­ing mar­ket size here was about 1.4 mil­lion sq ft as of the end of last Es­ti­mated ex­pan­sion of the co-work­ing mar­ket size in Sin­ga­pore this year, to more than 2 mil­lion sq ft, from about 1.4 mil­lion sq ft as of the end of last year, ac­cord­ing to CBRE. year. CBRE ex­pects the mar­ket to ex­pand by 50 per cent this year to more than 2 mil­lion sq ft.

None­the­less, the ef­fect of cowork­ing spa­ces on the real es­tate mar­ket should not be over­stated.

About 1 mil­lion sq ft of such spa- ces is lo­cated in of­fice build­ings – only about 1.6 per cent of the of­fice stock in Sin­ga­pore, said Mr Sim.

How­ever, it may also mean that more ex­pan­sion is in store, es­pe­cially as more play­ers in­vest in the co-work­ing scene. Big de­vel­op­ers are adapt­ing their strate­gies to mus­cle in on the co-work­ing land­scape.

Cap­i­taLand took a 50 per cent stake in co-work­ing op­er­a­tor The Work Project King­dom last Oc­to­ber, while Kep­pel Land has cre­ated its own co-work­ing brand, Kloud.

These devel­op­ments come amid greater gov­ern­ment recog­ni­tion of the need for flex­i­ble work spa­ces in a chang­ing, more fluid econ­omy.

A 2014 ini­tia­tive by the In­fo­comm Me­dia De­vel­op­ment Au­thor­ity saw Smart Work Cen­tres – pay- per-use workspaces with meet­ing rooms, Wi-Fi and pho­to­copiers – set up at three pub­lic li­braries here.

In­dus­trial de­vel­oper JTC Cor­po­ra­tion is also keen to sup­port the im­ple­men­ta­tion of co-work­ing spa­ces.

Mr Lim Jun­wei, di­rec­tor of the in­fo­comm me­dia and start-up clus­ter at the agency, said: “While JTC has not in­vested in co-work­ing spa­ces, we are open to work­ing with cowork­ing op­er­a­tors that are in­ter­ested in bring­ing their ex­per­tise and busi­ness into JTC es­tates.”

He added that JTC is cur­rently work­ing with co-work­ing op­er­a­tors such as UCom­mune and Bash, who also pro­vide pro­grammes to sup­port the start-up ecosys­tem at one-north.

Derek Wong

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