Shared office spaces to combat the office supply glut: Cushman & Wakefield report

Co-working spaces and shared offices may be a good idea for landlords who are worried about the upcoming supply of office space.
Co-working spaces and shared offices may be a good idea for landlords who are worried about the upcoming supply of office space. PHOTO: ST FILE

SINGAPORE - Office landlords worried about the vast amount of upcoming supply can consider turning to an emerging trend - shared offices, or co-working spaces.

Operators of these spaces can also consider adding more locations to their portfolio, by way of taking advantage of higher office vacancies.

Nearly 40 of such offices can now be found islandwide, since the first co-working office space opened in 2009, noted a report by Cushman & Wakefield.

"Rather than engaging in an intense price war on rental incentives and subsidies, the co-working concept...(can help landlords) attract and retain quality tenants," said Ms Christine Li, research director at Cushman & Wakefield.

This is as about 3.6 million sq ft of net lettable office area is set to be completed this year.

Rather than hand out traditional leases of two to three years, co-working operators charge a monthly membership fee for the use of hot-desking and shared facilities.

Memberships could cost as little as S$240 for up to 40 hours a month - much more affordable than a short-term lease at a centrally located service office, where tenancies typically start from S$600 per person per month, Ms Li said.

While this type of leases may not be attractive to landlords who prefer larger tenants with long leases, the co-working concept can be a good hedge, she said.

Landlords can consider building a portion of the vacant space together with committed space under the 'co-working concept' for quality anchor tenants.

"Landlords could convert undesirable or non-performing space to cater to the needs of tenants, while tenants will benefit from the extra option to rent the co-working space on an as-need basis," said Ms Li.

Some developers such as Keppel Land with its WorkSpace at Keppel Tower have already started offering flexible office arrangements, she noted.

This increases the diversity of tenant base and also boosts a building's occupancy rate.

In general, the concept is appealing for businesses as it allows them to scale up or down without incurring hefty rental costs, she added.

Tech firms may find it especially attractive - a basket of these firms tracked by Cushman & Wakefield found their space requirements have risen by an average of over 50 per cent a year, since they first set up permanent offices here.

"However, rigid terms in their existing lease terms are stopping them from instantaneously rescaling their space requirements," said Ms Li.

"Given the stability of demand from co-working and its is the opportune time for co-working operators to look at expansion, taking advantage of the current supply situation. "