Flexible working spaces spurring demand for CBD offices: Study

Co-working space provider WeWork opened its first location outside the CBD on Tuesday, in Jalan Besar (above). Colliers said such operators occupy 5 per cent of prime office areas in Singapore, but are also shifting towards city fringe areas and taki
Co-working space provider WeWork opened its first location outside the CBD on Tuesday, in Jalan Besar (above). Colliers said such operators occupy 5 per cent of prime office areas in Singapore, but are also shifting towards city fringe areas and taking up Grade B office stock. PHOTO: WEWORK
Funan by CapitaLand will host WeWork as well as a co-living serviced residence, as the lines between work and play become increasingly blurred.
Funan by CapitaLand will host WeWork as well as a co-living serviced residence, as the lines between work and play become increasingly blurred.ST PHOTO: GAVIN FOO

45% of prime grade office net absorption last year was by operators of flexible workspaces: Colliers International

Flexible workspaces are driving demand for Grade A office space in Singapore, in an area typically dominated by the finance industry.

A report by real estate services firm Colliers International said the sector made up 45 per cent of the net absorption for such space last year. Net absorption measures the new space leased by tenants after deducting the space vacated.

Together with technology, media and telecommunications (TMT) companies, operators of flexible workspaces accounted for 75 per cent of prime grade office absorption in Singapore last year, said the report released on Thursday.

The trend is seen in other parts of Asia as well, said Mr Terence Tang, managing director of capital markets and investment services at Colliers International, Asia.

In Asian central business dis-trict (CBD) areas, TMT groups and flexible workspaces accounted for about 23 per cent of prime office space, according to estimates by Colliers.

Mr Tang said: "Asian CBD areas have historically been dominated by finance. However, TMT groups and flexible workspace operators were key drivers of demand over 2017 to 2018."

He added: "Growth in these sectors may slow, but it is unlikely to reverse."

The expansion by flexible workspaces is especially significant in Singapore.

"We believe that flexible workspace is now fully established as an occupier sector, serving an important market niche," said the Colliers study. These operators occupy 5 per cent of prime office areas in Singapore, but are also shifting towards city fringe areas and taking up Grade B office stock.

Co-working space provider WeWork opened its first location outside the CBD on Tuesday, in Jalan Besar. This brings the number of its locations in Singapore to 10. The US-based company is due to open another office in Funan mall in the second quarter of this year.

WeWork South-east Asia managing director Turochas Fuad believes its locations in the CBD help revitalise buildings with its communities. "As 45 per cent of our community comprises enterprises, our foothold in the CBD district has enabled our community to bridge enterprises looking to tap the agility of start-ups in the same space," he said.

The changing occupier profiles will require commercial developers to provide greater flexibility in floor design, building configuration and specifications, said Mr Tang.

He added: "For developed properties, active asset and lease management is required on the part of commercial property owners to incorporate flexibility, short-term needs, enhanced tenant experience and provision of more amenities."

This may mean the lines between work and play may become increasingly blurred, as developers respond to a new market situation.

For example, Funan by CapitaLand will host WeWork as well as a co-living serviced residence, lyf by The Ascott. It will also count cinema Golden Village and theatre company Wild Rice among its tenants.

ZACD Group executive director Nicholas Mak views the trend of increased tenant mix in the CBD as a "sign of the times" with the rise of the gig economy.

"It is good to add more diversity to the office market," he said, pointing out that co-working operators in particular give small businesses leasing options in the CBD. However, he added: "We have to see in one or two years whether this trend is sustainable, too."

The increase in tenant mix may be in line with the Government's push for a livelier city centre too.

Minister for National Development Lawrence Wong said on Thursday in the parliamentary debate on his ministry's budget that new incentives are being explored to better support rejuvenation in the CBD.

"Specifically, we want to encourage more mixed uses in the CBD, such as residential and hotel, so that there will be activities beyond office hours," he added.

A version of this article appeared in the print edition of The Straits Times on March 09, 2019, with the headline 'Flexible working spaces spurring demand for CBD offices: Study'. Print Edition | Subscribe