Flexible workspaces treble to 3.7 mil since 2015, says Colliers

By Bong Xin Ying
/ EdgeProp Singapore |
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SINGAPORE (EDGEPROP) - Fast becoming a mainstream real estate asset class, flexible workspace in Singapore now occupies 3.7 million sq ft in net lettable area (NLA) of commercial space, trebling from 1.2 million sq ft just four years ago, says Colliers International in its latest research report on the flexible workplace sector in Singapore.
“Singapore is considered one of the most mature markets in Asia for flexible workspace,” says Tricia Song. The head of research for Singapore at Colliers International adds that “the sector has seen stellar growth at a compounded annual growth rate of 36% by NLA.”
This year alone, Colliers expects NLA for flexible workspaces to expand by 24% given the current low penetration rate of 5%, although with the higher base and tightening vacancy in the CBD, the pace of growth in 2020 could decrease to 15%.
From Colliers’ data, the bulk of flexible workplace stock, at 83%, is located in the CBD. The rest, at 12% and 5%, are in the city fringe and suburban areas respectively.
Within the CBD, flexible workspaces are most concentrated in Raffles Place/New Downtown at 52% with growth supported by WeWork’s lease of 200,000 sq ft of space at the HSBC Building at 21 Collyer Quay. Elsewhere, Shenton Way/Tanjong Pagar holds 22% of the flexible workplaces, City Hall at 16%, Orchard Road at 7%, and Beach Road/Bugis at 3%.
Given the tight vacancy in the CBD, Colliers’ Song notes that flexible workspace operators can be expected to “increasingly look at alternative locations outside the city”.

Stiffer competition

Currently, the top seven flexible workspace operators dominate 65% of the market share. They are WeWork (22%), IWG (16.6%), JustGroup (12.8%), The Work Project (4.9%), The Executive Centre (3.7%), Servcorp (2.6%), and The Great Room (2.3%).
Consolidation in the industry is happening though. While bigger operators have been scaling up their portfolios, smaller ones lacking economies of scale would either be acquired or pushed out. Colliers Research noted that most of the closures came from the small, single-spaced operators, which have an average floor space of 7,500 sq ft. Mergers and acquisitions among operators are one of the key trends that will continue to mould Singapore’s flexible workspace industry.
With stiffer competition, it “should bring about enhanced product differentiation, with an increasing focus on amenitisation”, says Rick Thomas, head of occupier services at Colliers International. While operators have to remain flexible to meet ever-changing occupier needs, companies are also expected to embrace the Flex and Core strategy, notes Thomas.

Trends and outlook

In Singapore, continued consolidation, expansion into retail/hotel space, and increased collaboration between landlords and operators will shape the flexible workspace industry.
JustCo, for example, took up 60,000 sq ft of retail space at Marina Square in 2Q2018, and many operators have since moved to launch in non-office spaces. IWG’s Spaces took up 35,000 sq ft each in both One Raffles Place and TripleOne Somerset, across four floors and two floors respectively.
The Great Room now occupies 15,000 sq ft of space on the second floor of the restored Raffles Hotel Singapore, setting a precedent as the first co-working space to be integrated in a six-star hotel.
CapitaLand’s joint venture with The Work Project and City Development’s partnership with Distrii, GuocoLand’s allocation of 15% of Guoco Midtown’s NLA for flexible workspace, and Lendlease’s entry into the industry with its own flexible workspace brand, csuites, are all examples of a greater collaboration between landlords and flexible workspace operators.
“While the established co-working operators currently offer improved services, experience and workplace solutions through their expertise, should conventional landlords launch their own co-working products and enter the market in a meaningful way instead of offering long-term leases to established operators, the dynamics and outlook of the sector could change significantly,” says Colliers’ Song.
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