Hong Kong’s flexible work space offering grows 50% in three years
Demand for flexible offices – including co-working spaces and serviced offices – has been growing faster in Asia Pacific than anywhere else in the world. At present, there are more than 50 operators in HK with over 80 locations in the city, covering well over 1 million sq ft.
HONG KONG, May 16, 2018 – Demand for flexible offices – including co-working spaces and serviced offices – has been growing faster in Asia Pacific than anywhere else in the world, according to the latest research by JLL. The region’s stock of flexible floor space is growing at 35.7% per year compared to 25.7% in the US and 21.6% in Europe. In Hong Kong, the flexible work space offering has grown by 50% in three years with almost 90% of all new offerings in the past five years, coming over in the past two years.
The report, which looks at major co-working and serviced office operators in 12 Asia Pacific markets, reveals that the number of major flexible space operators doubled, while flexible floor space also increased by 150% between 2014 and 2017.
Denis Ma, Head of Research at JLL in Hong Kong, says: “More recently, Hong Kong has seen a flurry of co-working operators establish locations across the city, with their footprint increasing fourfold over the past two years, alone. At present, there are more than 50 operators with over 80 locations in the city, covering well over 1 million sq ft. Notwithstanding that co-working is still a relatively new concept in Hong Kong, we still see plenty of room for growth ahead with many operators, especially those from mainland China, still eager to establish a foothold in the city.”
Alex Barnes, Head of Markets at JLL in Hong Kong, adds: “Co-working operators, from all parts of the world, are extremely active in Hong Kong. The cohort is now one of the major and growing sources of office demand. Given tight supply and high rents on Hong Kong Island, especially in Central, operators have increasingly shifted their focus towards growing office districts such as Kowloon East. Operators are fighting for the best space and a large foothold in the market.”
Commenting on the Hong Kong market’s development, Ma concludes: “How fast co-working grows will hinge on how quickly operators are able to roll-out enterprise models that accommodate larger corporate occupiers rather than relying solely on demand from the start-up community alone.”
Flexible work spaces could comprise as much as 30% of corporate commercial property portfolios worldwide by 2030, according to Susan Sutherland, Head of Corporate Solutions Research at JLL Asia Pacific. She says: “Although corporate adoption is still in its early days, there are certain factors that will continue to make this region a hot spot for co-working 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 prefer to operate out of co-working work spaces.
For example, as part of the Hong Kong government’s “Space Sharing Scheme for Youth” initiative, that supports creative and emerging industries, about 90,000 sq. ft. of shared work spaces has been set aside for start-ups and those in arts and culture-related work at discounted rental rates starting in 2018. These work spaces are located in Wanchai, Wong Chuk Hang, Lai Chi Kok, Kwun Tong and Tsuen Wan.
Meanwhile, in Singapore, the government is also supporting the development of flexible locations such as the JTC LaunchPad, which is home to a number of tech start-ups. Similarly, reforms introduced by the Japanese government to improve work-life balance and productivity are pushing domestic companies to explore more flexible ways of working.
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.
At the same time, businesses are looking to encourage collaboration among employees and are using shared work spaces as a way to foster innovation through exposure to new ideas and ways of working.
According to the report, some companies have even started their own internal co-working facilities, or have incorporated features of flexible space into existing offices to make the work environment
more engaging. This helps to build a community feel and can be a differentiator when it comes to attracting and retaining young talent.
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 synchronisation with the casual environment of many co-working hubs, providers may need to adapt to cultural preferences to ensure a smoother transition to flexible working for some corporates.
Implications for real estate investors
In response to growing demand, JLL notes that landlords will continue to form joint ventures with co-working operators, or create their own flexible space offerings to meet tenant needs. Meanwhile, developers are adapting to what could be a new standard in property development, whereby flexible work spaces 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 in the region. Looking ahead, we can expect convergence to continue growing,
with serviced office operators developing co-working brands and co-working brands targeting the clients of serviced operators in the market,” says Sutherland.
JLL (NYSE: JLL) is a leading professional services firm that specializes 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 annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 90,000 as of December 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com