More firms flock to co-working spaces in Singapore but rising costs hit operators’ profit margins

Trehaus, co-founded by Ms Elizabeth Wu, is a co-working space at Funan integrated with its own pre-school and childcare service. ST PHOTO: GAVIN FOO

SINGAPORE – Ms Elizabeth Wu, 41, who is a mother of three, saw a business opportunity when she realised that there was no co-working space here that allowed parents to be near their children.

She co-founded Trehaus with Ms Elaine Kim in 2016 to plug the market gap.

Trehaus is a co-working space at Funan integrated with its own pre-school and childcare service, where parents can work and be near their children at the same time. The company also provides child-minding support.

The company, which has 47 employees, now houses about a dozen companies in its 15,000 sq ft space and has 20 families using its co-working space and childcare services.

“We’ve seen an increase in people interested in using our services due to the recent push for flexible working and people re-examining their options for work. We also capture the niche crowd of parents who want to work near their children,” said Ms Wu.

The demand for flexible workspaces is bouncing back, according to property consultancy CBRE in a report on Nov 25.

Occupancy at Singapore’s flex space centres has recovered from an average of 50 per cent to 60 per cent during the pandemic to 80 per cent to 90 per cent on average by the third quarter of 2022, with the reopening of borders and resumption of back-to-office arrangements, the report showed.

Said CBRE: “Leasing volume by flex operators in office space amounted to 0.15 million sq ft in just the first nine months of 2022, overtaking 2021’s full-year volume of about 0.12 million sq ft.”

Some co-working spaces, like Trehaus, put a different spin on the concept to stand out from competition.

Trehaus is an integrated space for families with a pre-school and childcare and office space. ST PHOTO: GAVIN FOO

Another example is Japanese-owned co-working hub and innovation platform One&Co, which aims to help Japanese companies expand into Singapore and vice versa. It does this through the networking opportunities that come from working in the same shared offices, which lead to collaboration among the companies.

The brand was established by East Japan Railway Company in 2019. Its private office is fully occupied with more than 250 companies in its office space spanning 13,164 sq ft at Twenty Anson. Inquiries to use One&Co’s space have doubled since 2021, said general manager Takahiko Ito.

One company that has benefited from One&Co’s cross-expansion platform is business design consultancy firm Nomura Design and Engineering Singapore, which set up operations here in 2008 and moved to One&Co’s space in May 2022.

Its executive vice-president Ashida Akira, 47, said the relocation not only helped his employees become more interactive, but also boosted the number of projects they got by 30 per cent due to the networking chances.

Co-working giants WeWork and JustCo saw an increase in demand for their services due to greater receptivity for flexible workspace solutions among workers. WeWork observed a rise in physical memberships of 23 per cent year on year. Physical memberships at WeWork are occupied workstations in a given period.

Mr Ho Seng Chee, chief corporate officer of JustCo, which has 18 centres here, said more multinational corporations now turn to flexible workspaces as their primary office. Around half its members are from MNCs.

JustCo at The Centrepoint. ST PHOTO: GIN TAY

Inflation and supply chain delays have created more uncertainty, especially for tenants looking for traditional office space, said Mr Balder Tol, general manager for Australia and South-east Asia at WeWork.

“Companies that are hiring and growing need space now, and the supply chain delays that the world is facing have further driven demand for our product. A traditional office tenant could spend up to 18 months sourcing and building out a space.

“With WeWork, members are able to take immediate occupancy, as nearly 80 per cent of our members move in within two months,” he added.

JustCo saw an increase in demand for their services due to greater receptivity for flexible workspace solutions among workers. ST PHOTO: GIN TAY

However, despite the increased demand, co-working space operators face rising costs from inflation, with higher property rentals and electricity charges hurting profit margins.

Trehaus’ Ms Wu said while the firm has not raised prices this year, she foresees that the bill for its services will have to go up by 10 per cent as utility fees, cost of goods as well as maintenance and repair expenses have gone up by 10 to 20 per cent.

“We’ve tried not to raise our prices to be in solidarity with our clients during the pandemic, but costs are going to be more of a problem next year with the goods and services tax (GST) hike,” she said. The GST rate will be raised from 7 to 8 per cent from January 2023 and to 9 per cent from 2024.

Ms Elizabeth Wu (pictured) co-founded Trehaus with Ms Elaine Kim in 2016 to plug the market gap. ST PHOTO: GAVIN FOO

The increasing number of competitors is also a challenge that co-working companies could face, said One&Co’s managing director Wu Zhi Jie.

As at the third quarter of 2022, the flex space market spans approximately 3.71 million sq ft across 176 centres, quadrupling from 0.82 million sq ft across 85 centres in 2013, CBRE’s report showed.

“We have not increased our rates at all so far, but we may have to do so due to inflation driving up our costs,” added Mr Wu, revealing that electricity charges have spiked by about 25 per cent, along with a 5 per cent uptick in other costs compared with 2021.

On the flipside, looming economic challenges could benefit co-working companies as well, said JustCo’s Mr Ho.

“In tough economic times, customers typically want more flexibility in office leases in order to minimise fixed costs. Co-working can provide that flexibility whereas fixed-term leases cannot,” he added.

While the overall demand for office spaces could slow down in the near term on the back of rising global economic headwinds and more conservative corporate real estate demand, flex operators could take this opportunity to acquire new sites and expand, as the flex space market looks set for further growth owing to the expanding demand, said CBRE.

Said Mr Ho: “With the looming economic uncertainty and base building rents forecasted to increase, securing new sites will require more cautious underwriting by co-working companies.”

Join ST's Telegram channel and get the latest breaking news delivered to you.