The rapid rise in flexible space has led to a new way of working. Landlords and companies are increasingly creating their own flexible spaces, but co-working operators are arguably the most popular as they have quickly expanded to provide flexible space as a service.
In Asia Pacific, a revolution in flexible space is underway. JLL Research estimates that flexible space will jump from its present 5% to a remarkable 30% of global corporate commercial property portfolios by 2030.
Fast growth, upgrade demand
In Beijing, we have seen phenomenal growth in co-working, in terms of market size and number of operators. Most recently, in the first half of 2018, several local operators – such as Kr Space and Mydream+ – expanded quickly after securing funds, opening multiple locations around the city. US operator WeWork also continued its growth trajectory through the acquisition of Naked Hub, which added to the co-working activity in the market.
Also in the first six months of the year in Beijing, we saw domestic operators entering Grade A buildings – with some even doubling their rental affordability from a year ago. This is in stark contrast to the low-rent office towers that these operators previously focused on. Prime malls are also a growing space for co-working operators in the city.
With some operators leasing spaces as large as 10,000 sqm in the market, the co-working boom is set to continue, particularly as flexible space inspires more people to change the way they work. Start-ups are not the only ones in the game either. Companies with traditional office set-ups are increasingly considering new approaches to how they work. For top co-working operators in the market, occupancy rates are at least above 80%, with some locations opening fully occupied as tenants chase them to secure co-working spaces.
Unicorns, traditional firms take to flexible space
The area in and around Zhongguancun or China’s Silicon Valley is immersed in start-up culture and tech companies will continue to drive co-working demand here as their growth outlook remains strong. A number of unicorn companies are growing at a frenetic pace and swallowing up co-working spaces; they cannot afford to wait for fit-outs to be completed or office buildings to become available.
Another growing source of demand comprises large, established companies, and even some state-owned enterprises in Beijing. Although traditionally more conservative with their office real estate strategies, these firms are starting to move some operations to co-working spaces to test whether flexible space is suitable for them as a company. Co-working operators have been feeding this demand with increased expansion to core office submarkets, giving these companies more opportunities to trial the flexible space-environment.
As interest in flexible space continues to be high, co-working is set to remain a fixture in the market – and is here to stay.
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