By Christine Li, Head of Research for Cushman & Wakefield Singapore
Co-working spaces around Singapore’s Central Business District (CBD) have seen a healthy take-up, as the local property market softens and business demand for flexible work areas rises. An average of 2 million square feet of office space is expected to be completed in the CBD in 2016 and 2017. This is double the annual average of 1 million square feet over the past 10 years.
Currently, there are 53 co-working space locations in Singapore, almost one-third of which are in the Central Business District (CBD) – up from about one-fifth of the overall 40 co-working offices a year ago. As a result, the growing popularity of co-working, and subsequent increase in having such operators will help soak up the market supply.
Co-working spaces have grown in popularity in recent years. While typical users include frequent travellers and freelancers who do not need to work out of traditional offices, the concept of co-working has also found favour among start-ups and small and medium enterprises which are not ready to commit to a long-term office lease.
The average co-worker only uses his/her space for less than 20 hours a week, according to UK firm Emergent Research. Thus, co-working operators are marketing more than just an office table. This increase in up-take on co-working spaces can help to optimise yield amid a soft office property market outlook, while providing users with benefits such as access to prime locations and regional networks, lease flexibility, space for communal interactions and invitations to networking events and business contacts.
So what can we expect as a result of this upward trend in Singapore? It is likely that the increasing popularity of co-working space in Singapore will enable serviced office operators to tap into a growing and lucrative source of revenue. As many co-workers do not utilize their space every single day, co-working space operators will be able to sell more memberships than what the actual maximum physical capacity allows in the context of a traditional tenancy. This translates into higher revenue per floor area as compared to private serviced office rooms. Besides providing hot-desking spaces, the serviced office operators also incorporate private rooms as they help to generate good cash flow for the business until the co-working community grows to a critical mass.
As the concept of co-working grows and matures, the resulting ecosystem will allow the co-working space in Singapore to evolve into the next phase of maturity. Ultimately, consumers are on the winning end as they will benefit from the wider range of concepts and greater product differentiation over time.