Coworking space operators in the Greater Bay Area are reaping a bonanza as the pandemic saps demand for traditional fixed offices, with more workers opting for hybrid work. Zhang Tianyuan reports from Hong Kong.
Economic uncertainties induced by COVID-19, with tumbling office rents, have turned out to be a boon for coworking space operators in the Guangdong-Hong Kong-Macao Greater Bay Area as the demand for flexible office services rises.
It’s a growing trend in the global office market since the world’s first designated coworking space opened in the United States about 17 years ago, and Hong Kong has got off to an early start.
Operators of coworking facilities in Hong Kong have not only been expanding their operations in the past two years, they have been upgrading their outlets to high-end offices in prime locations to lure tenants to relocate there, said John Siu Leung-fai, managing director and head of project and occupier services at Cushman & Wakefield Hong Kong.
Currently, there are about 100 coworking spaces in office premises in the special administrative region, with two-fifths of them being Grade A offices, according to Cushman & Wakefield. In an office market report last month, the global commercial real-estate services firm identified coworking space providers as an important driver of Hong Kong’s office absorption this year.
“We expect operators, particularly those with strong clientele, attractive localities, premium fit-outs and competitive rents, to continue expanding,” Siu said.
He added that he expects tenants to prefer agile lease arrangements in the near term, and the workforce to look for more flexible working hours or location choices. “Coworking space operators often offer multiple locations in the city and long opening hours to accommodate their clients’ needs.”
Ada Fung, head of advisory and transaction services (office services) at CBRE Hong Kong, said coworking space provides an alternative to traditional fixed offices for companies to access the market as it allows them to cut costs by operating flexibly in size, lease duration, ease of expansion and exit, saving upfront fit-out expenses. “All these are important in times of economic uncertainty, like what we’re going through now.”
According to the Instant Group, which specializes in independent flexible workspace solutions, the demand for flexible workspace in the SAR has gone up 22 percent from 2019 to 2021.
Dane Moodie, executive director of advisory and transaction services at CBRE Hong Kong, said the flexible workspace sector has become popular as tenants can benefit from pliable lease tenures when the economy slows.
“A lot of organizations, including large multinational corporations, now look at the flex option very seriously against traditional office space, particularly in key markets (such as Hong Kong) that have historically faced high rents, as well as markets facing uncertain growth recently,” he added.
Sam Lai, senior director and head of commercial at Savills Southern China, said the phenomenon of companies turning to agile working spaces is more apparent in Guangzhou, capital of Guangdong province, where several leading Japanese corporations have reduced renting or even withdrawn from Grade A offices, and taken up coworking offices.
International Workplace Group — the world’s largest serviced office company by sales revenue — has opened its 18-story office center in Hong Kong. The 6,020-square-meter office at 8 Queen’s Road East in Wan Chai, was previously occupied by its peer, WeWork. Local flex space operator theDesk has taken up 1,607 square meters of space at One Pacific Centre in Kwun Tong as part of their expansion strategy, while the Executive Centre has taken up 4,376 square meters at 28 Stanley Street in Central.
Siu said it’s now a great opportunity for flex space operators to expand as the city’s office rents have fallen by nearly 27 percent from their peak in April 2019.
“With abundant available space — about 9 million square feet (836,127 square meters) as of the second quarter, plus ample newly completed space of around 2.5 million square feet — by year end, rents are expected to remain at a low level in the near term,” he added.
A survey by International Workspace Group in May showed that 76 percent of job seekers among 2,000 respondents in the Greater Bay Area would like to take up hybrid work. About half of them said they preferred long-term flexible working rather than a 10 percent pay rise.
The group said its joint venture with Hong Kong-based property company Hysan Development plans to set up more coworking offices across the Greater Bay Area. The joint venture currently operates 34 flexible office centers in the region.
“Hong Kong workers have been accustomed to working from home during the prolonged coronavirus outbreak. As a result, the demand for fixed offices has declined,” said Nelson Chong, director of asset investment at Golden Region World Realty.
Tang Wei, co-founder of Shenzhen CFG Business Services Co, is also upbeat about the prospects for coworking space operators in Chinese mainland cities of the Greater Bay Area. He estimated the penetration rate in the sector in mainland cities stands at only 5 to 8 percent compared with 20 percent in Hong Kong.
“With the nation’s economy growing, we expect to see the stable and continued expansion of the agile office leasing sector in the next two decades in the Greater Bay Area,” he said.
Shenzhen CFG operates 157 agile offices in Guangdong province and Hong Kong, accounting for nearly 63 percent of the company’s total number of offices for leasing. Tang said the firm has maintained a 15 percent annual growth rate in its coworking spaces in Shenzhen and Guangzhou in the past two years.
Contact the writer at tianyuanzhang@chinadailyhk.com