Flexible Office Space in Asia Surges 150% in 3 Years, Operators Double, JLL Finds

Asia Pacific is leading the global surge in flexible offices, with total co-working and serviced office space in the region soaring 150 percent from 2014 to 2017, according to a new report by property consultancy JLL.

During those three years, net lettable area of flexible space increased at a compound annual growth rate of 35.7 percent in key Asia Pacific markets, compared to 25.7 percent in the US and 21.6 percent in Europe. Total flexible space now measures nearly 1.3 million square metres across the dozen regional markets sampled by the agency.

Beijing and Shanghai boast the highest flexible office penetration rate – the ratio of flexible space to overall grade A office stock – in the region, at more than 3.5 percent each, while Hong Kong ranks lowest with just over one percent.

Shanghai alone has more than 1,000 shared or serviced space locations, most of them very small, according to the report “Spotting the Opportunities: Flexible Space in Asia Pacific,” which was published by JLL last week.

Flexible Office Players Double in Three Years

The data from the global brokerage covers high-profile co-working and serviced office providers that lease out space on the open market, and excludes incubator and accelerator space as well as internal co-working spaces.

According to JLL, the number of major co-working operators in Asia Pacific more than doubled from 45 to 103 in the 2014-2017 period, even as established service office providers such as IWG (formerly Regus) and The Executive Centre continued to roll out new spaces and develop their own dedicated co-working products.

The years 2016 to 2017 proved to be an “inflexion point” for the industry in Asia, the report notes, as international players such as WeWork entered the fray, and local operators quickly ramped up, including naked Hub and Ucommune in China, Awfis in India and The Working Capitol in Singapore.

Co-Working Shrugs Aside Asian Leasing Obstacles

The rapid growth of the sector is all the more remarkable given the various obstacles to co-working adoption in Asia, such as the availability of short lease terms for traditional offices, which takes the edge off many companies’ appetite for flexible space. Office lease terms in Asian markets (except for Japan and Australia) tend to be around three years, compared to the 10-year contracts typically offered in the US and Europe.

Moreover, the cost advantages of co-working nearly disappear in some markets when the greater density of shared office facilities is taken into account. In Singapore, for instance, JLL finds that traditional office leases are only five percent pricier than flexible offices after adjusting for differences in floor space per person – and this does not account for additional charges that some co-working providers levy for services, such as bookings for meeting rooms and events.

“Cultural norms may also impact the adoption of flexible space in the region,” commented Susan Sutherland, Head of Corporate Solutions Research, JLL Asia Pacific in a statement. “With a more hierarchical corporate culture in Asia that is not always in sync with the casual environment of many coworking hubs, providers may need to adapt to cultural preferences to ensure a smoother transition to flexible working for some corporates.”

Governments Step in to Boost Sector

On the other hand, a number of governments in the region are jumping on the co-working bandwagon as part of a broader push to support startups and entrepreneurs. The Singapore government has set up LaunchPad, a startup ecosystem inspired by Silicon Valley, while the New South Wales government opened the 17,000 square metre Sydney Startup Hub in Sydney’s business district this past February. Both facilities are home to flexible office venues, such as Beijing-based Ucommune’s first overseas location in LaunchPad.

In addition, a growing roster of landlords are getting in on the act, with high-profile examples including Swire Properties’ Blueprint in Hong Kong, City Developments Ltd (CDL)’s Distrii-branded space in Singapore, and CapitaLand’s first Chinese co-working centre C3 in Shanghai.

Among 12 Asian markets surveyed by JLL, Shanghai, Beijing and Bengaluru lead the pack for total flexible office space, with over 200,00 square metres of net lettable area in each market. Hong Kong, Tokyo and Melbourne each have about 100,000 square metres, while Singapore is home to roughly 80,000 square metres, and Seoul lags with just over 50,000 square metres.