Flexible workspace sector marches on in Singapore

– Flexible workspace sector registers stellar growth of 36% CAGR (by net lettable area) over the last three years
– Flexible workspace sector is projected to grow by 24% in 2019 and 15% in 2020 on continued adoption
– The top three players in the Flexible workspace sector – WeWork, IWG, and JustGroup – now hold over 50% of the market share (by NLA)
– Flexible workspace sector operators likely to continue to expand into fringe areas or retail/hotel space given the tight vacancy in the CBD

flexible workspace sector

Image credit: Colliers International

Colliers International has today published its latest research report which examines the growth and outlook of the flexible workspace sector in Singapore.

Flexible workspace sector, comprising coworking centres and serviced offices, has risen in prominence in recent years to become a mainstream real estate asset class globally. Supported by robust demand from occupiers, the flexible workspace sector witnessed tremendous growth in Singapore. It now accounts for 3.7 million sq ft of net lettable area (NLA) of commercial space island-wide – more than trebled from the 1.2 million sq ft in 2015.

Colliers Research projects that the total space takeup by the flexible workspace sector could grow by 24% in 2019 on continued pace of adoption. The pace of growth could likely slow to 15% in 2020, due to a higher base and tight vacancy.

Tricia Song, Head of Research for Singapore at Colliers International, said, “Singapore is considered one of the most mature markets in Asia for flexible workspace. In the last three years, the sector has seen stellar growth, at a compound annual growth rate (CAGR) of 36% by NLA. We believe it will continue to advance and expand, given the still-low penetration rate of 5%. That said, given the tight vacancy in the CBD, we would expect flexible workspace operators to increasingly look at alternative locations outside the city.”

Data tracked by Colliers Research showed that 83% of the flexible workspace stock is located in the central business district (CBD), with 12% in the city fringe and 5% in suburban areas. Within the CBD, flexible workspace is most concentrated in the Raffles Place/New Downtown micro-market (52%) – boosted by the lease of 200,000 sq ft of space at 21 Collyer Quay (HSBC Building) by WeWork.

Competitive landscape
The top seven flexible workspace operators now hold 65% of the market share, with the top three – WeWork, IWG, and JustGroup – holding 51% of the enlarged pie. This reflects consolidation in the industry, as the bigger operators have been scaling up their portfolios aggressively, while some of the smaller operators with no economies of scale were either acquired or squeezed out. Based on Colliers’ research, most of the closures came from small-sized, single-space operators, with an average floor space of 7,500 sq ft.

The industry is likely to remain competitive with the entrance of conventional landlords and global players, given a relatively transparent and fragmented market with little product differentiation.

Rick Thomas, Head of Occupier Services at Colliers International, said, “The stiffer competition in the sector should bring about enhanced product differentiation, with an increasing focus on amenitisation. To stay competitive, we believe operators would have to remain nimble, customer-centric, and be flexible in customising space to meet evolving occupier needs. On the demand side, we expect more companies – including large corporates – to embrace the Flex and Core

™

strategy in view of rising business uncertainties and increased adoption of flexible work arrangements by employers.”

Trends and outlook
The sector is set to see more growth and Colliers Research has identified three key trends that would shape the flexible workspace industry in Singapore: continued consolidation; expansion into retail/hotel space; and increased collaboration between landlords and operators.

Continued consolidation
Industry consolidation would likely continue by way of collaboration between landlords and flexible workspace operators, and/or mergers and acquisitions among operators to drive greater synergies, or international operators looking at leveraging local market knowledge as a way of entering the market.

Expansion into retail/hotel space
Since Justco’s move into Marina Square in Q2 2018 (taking 60,000 sq ft of retail space), other operators have followed in its footsteps to launch flexible workspace in non-office space. In particular, The Great Room is occupying 15,000 sq ft of space on level two of the restored Raffles Hotel Singapore, the first co-working space to be integrated in a six-star hotel. Similarly, for retail, IWG’s Spaces took up 35,000 sq ft spanning four floors in One Raffles Place mall, and another 35,000 sq ft over two floors in TripleOne Somerset mall.

Increased collaboration between landlords and operators
There is greater collaboration between landlords and flexible workspace operators, including CapitaLand’s joint venture with The Work project, as well as City Developments’ partnership with Chinese co-working operator Distrii. Frasers Property, which has taken a stake in JustGroup Holdings, is also partnering JustCo together with GIC to develop a coworking space platform across Asia. Meanwhile, GuocoLand has allocated 15% of Guoco Midtown’s NLA for flexible workspace, and Lendlease is entering the industry with its own flexible workspace brand called csuites, with the first centre in Paya Lebar Quarter.

Ms Song added, “Finally, we see one crucial factor impacting the sector: while the established coworking operators currently offer improved services, experience and workplace solutions through their expertise, should conventional landlords launch their own coworking 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.”

How to Secure a Commercial Loan Quickly

Are planning to purchase properties for investment in the the largest data centre market in this region but unsure of funding? Don’t worry because iCompareLoan mortgage brokers can set you up on a path that can get you a commercial loan in a quick and seamless manner.

Alternatively you can read more about the Best Commercial Loans in Singapore before deciding. Our brokers have close links with the best lenders in town and can help you compare Singapore commercial loans and settle for a package that best suits your commercial purchase needs.

Whether you are looking for a new commercial loan or refinance, our brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the loan. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them.

For advice on a new commercial loan or Personal Finance advice.

To speak to our Panel of Property agents.

For advise on refinancing advice.

The post Flexible workspace sector marches on in Singapore appeared first on iCompareLoan Resources.