Flexible space represents a variety of work spaces used by occupiers to increase their portfolio flexibility through short to medium-term leases in order to reduce occupancy costs as well as to enhance collaboration by moving away from the traditional concept of a cubicle-dweller work space.
Most prevalent types of flexible space are mainly co-working facilities and business centres – of which both categories are currently upgrading their offering to a hybrid model that aims to harmonise common space and private rooms. Interestingly co-working facilities these days feature more private rooms while business centres on the other hand are gradually moving towards common work spaces.
In Ho Chi Minh City, some of the prominent co-working operators include Toong, Dreamplex, Circo, Workyos and UP. Similarly, there are popular business centre operators in the city such as Regus, Kloud and CEO Suites.
Supply and demand
Vietnam’s flexible space market is still at its early stages, although the first business centre – Regus, started operations in 1999. In line with the flexible space boom in Asia Pacific that began in Singapore circa 2016, the supply of flexible space in Vietnam has soared since 2017 with many local operators opening their doors to occupiers.
Figure 1: Flexible work space penetration rate in Southeast Asia
Source: JLL estimates
Since 2018, the Vietnam market has welcomed more foreign flexible space operators such as Kloud, CEO Suites, The Executive Centre and WeWork – which will open its first outlet in December 2018.
There is a divergence in space requirements between local and international operators. While local operators tend to locate their flexible space facilities in Grade B or lower grade office buildings, international operators often seek higher grade buildings that match their product quality.
Currently, demand for flexible spaces come mainly from start-up companies that prefer shorter and flexible lease terms as well as corporates looking for temporary spaces.
Opportunities
The start-up community in Vietnam is growing fast, due to the positive economic outlook as well as increased funding from the private sector and government-led programmes . We expect these favourable market fundamentals to persist in the near term and expect the demand for flexible space to follow an upward trajectory in the future.
Flexible space is often seen as the answer to changing work patterns that place emphasis on innovation and collaboration. Additionally, it offers a cheaper alternative and more flexible space options for companies compared to traditional concepts because of reduced costs from sharing fit-out expenses and better use of facilities and amenities.
Challenges
With limited availability of Grade A and B office across the city and low supply in the pipeline, operators need to consider shophouses or newly completed retail space as alternative options to setting up flexible work spaces.
Additionally, some co-working operators have found it challenging to retain tenants. Some short-term tenants tend to shift to newer spaces while some larger tenants upgrade towards medium- and long-term leases. Potentially, the establishment of a community could be the solution. It is perceived that as long as workplace users continue to benefit from collaboration and are able to develop connections with other users, they will be less likely to move to other newer options.
More on 'Office' in 'Vietnam'
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- Vietnam protech, present and futureJuly 18, 2019
