Asia Pacific outpaces the rest of the world in growth of flexible work spaces

SINGAPORE, 17 May 2018 – Demand for flexible offices – including coworking spaces and serviced offices – is growing faster in Asia Pacific than anywhere else in the world, according to new research by real estate consultant JLL. The region's stock of flexible floor space is growing at 35.7 per cent per year compared to 25.7 percent in the US and 21.6 per cent in Europe.

The report, which looks at major coworking and serviced office operators in 12 Asia Pacific markets, reveals that the number of major flexible space operators has doubled, while flexible floor space has increased by 150 per cent between 2014 and 2017.

"By 2030, flexible work spaces could comprise 30 per cent of corporate commercial property portfolios worldwide," says Jeremy Sheldon, Managing Director, Markets & Integrated Portfolio Services, JLL Asia Pacific. "Although corporate adoption is still in its early days, there are certain factors that will continue to make this region a hot spot for coworking growth."

A key driver, says the report, is that governments are encouraging entrepreneurship to offset the slow growth in traditional industries such as manufacturing, and are offering financial resources and backing for small companies, many of whom locate in coworking-style spaces.

For example, in Singapore, the government has supported the development of flexible locations  such as the JTC LaunchPad, which is home to a number of tech start-ups. Similarly, the New South Wales government supported the development of Sydney Startup Hub, a 17,000sqm tech zone catering to aspiring entrepreneurs. Meanwhile reforms introduced by the Japanese government to improve work-life balance and productivity are also pushing domestic companies to explore more flexible ways of working.

Ms. Tay Huey Ying, Head of Research and Consultancy, JLL Singapore, comments: "In Singapore, flexible work space footprint by major operators tracked in the report has grown by 70 per cent to 0.9 million sq ft by the end of 2017 from 0.5 million sq ft at the end of 2014. They have capitalised on the soft rental environment amid an influx of new supply to expand their footprint to grab market share. This is particularly the case in the CBD where URA's statistics showed close to 4 million sq ft of net new supply came on stream between 2014 and 2017."  

"Including operators not tracked in the report, flexible space's real estate footprint stood at an estimated 2.1 million sq ft as of the end of 2017, accounting for just 2.5 per cent of islandwide office stock. While flexible space operators are still on an expansion spree, we expect their footprint to remain below 5 per cent of islandwide office stock over the long term. However, including flexible space in corporates, this could increase to 30 per cent by 2030", she continued.

The report also identifies plug-and-play simplicity as a factor in the growth in corporate demand, particularly for larger companies. The ability to move in and out of an office at short notice, and avoid complicated contract negotiations and fit-out work is a convenient option for many occupiers.

Chris Archibold, Head of Leasing at JLL Singapore, says: "On the supply side, the recent proliferation of third party flexible space operators in the Singapore market means that there are now over 70 operators offering space in the market. The demand has kept up with supply thus far, but it is inevitable that there will be some consolidation in the market.  The well-funded regional and global players generally have strong differentiation from a both geographic (i.e. access to many centres in many markets) and a product point of view. For the smaller players, it is vital to have clear differentiation to their offering otherwise they will compete on price which will be challenging with the multitude of options available for the end users."

However, there remain some barriers to the widespread use of flexible space. Large corporates place a high value on retaining their brand identity and culture as well as the need to protect data and secure their IT infrastructures.

"Cultural norms may also impact the adoption of flexible space in the region. 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," explains Ms. Sutherland.

Implications for real estate investors

In response to growing demand, JLL notes that landlords will continue to form joint ventures with coworking operators, or create their own flexible space offerings to meet tenants' needs. Meanwhile developers are adapting to what could be a new standard in property development whereby flexible workspace will be an amenity as essential in a commercial building as food and beverage outlets or a gym.

"Given the competitive dynamic of this new sector, we are already seeing consolidation even among the biggest players. Looking ahead, we can expect convergence to continue growing, with serviced office operators developing coworking brands and coworking brands targeting the clients of serviced operators in the market," concludes Ms. Sutherland.

For more information, download 'Spotting the Opportunities: Flexible Space in Asia Pacific' now.

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Note:

The report refers to flexible office space as the net lettable area occupied by major coworking and serviced office operators in 12 key cities across the region, excluding incubators, accelerators and corporates' internal coworking spaces.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with nearly 300 corporate offices, operations in over 80 countries and a global workforce of 83,500 as of March 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 offices in 16 countries across the region. The firm won the 'World's Best' and 'Best in Asia Pacific' International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the seventh consecutive year by Real Capital Analytics.  www.ap.jll.com.