The Rise of Flexible Work in APAC
Coworking spaces have enjoyed exponential growth in recent years. According to the Research and Markets ‘Coworking Space Global Market 2021: Covid-19 Growth and Change to 2030’ report, the global coworking space market is expected to ‘grow from $7.97 billion in 2020 to $8.14 billion in 2021 at a compound annual growth rate (CAGR) of 2.1%’. This growth in demand was in part driven by the need for professional spaces following local restrictions on traditional office capacity and commercial activities.
The Asia-Pacific region (APAC) has stood out in the coworking market – it is currently, the largest coworking market in the world. CBRE noted that around ‘300 co-working spaces (are) located in Asia Pacific gateway cities including Hong Kong, Singapore, Shanghai, Tokyo, Sydney and Melbourne’.
In Singapore, coworking spaces have tripled since 2015. Despite the island’s limited (and often pricey) commercial space, flexible workspaces account for about 4.2% of total office area. The rest of Southeast Asia has also closely mirrored this trend.
According to Consulting and Research, shared working space is projected to increase from 10% to 15% of the total office supply by 2030. Many Southeast Asian cities such as Kuala Lumpur and Jakarta are also notedly home to a generous host of diverse and extremely price-competitive coworking spaces.
Hong Kong, another Asian economic powerhouse, has about 166 coworking spaces, closely rivalling the number of coworking spaces in London and New York City. Both asian cities have been noted to be some of the fast growing markets for flexible workspaces, albeit the short-term deceleration of growth due to pandemic.
However, the rapid digitalisation of the global economy brought about by Covid-19 has culminated in aggressive policy pushes from Asian governments that ‘encourage knowledge-based start-ups and entrepreneurialism in a bid to offset the slowing growth in traditional industries’. And most obviously, the growth of such knowledge-based industries will likely propel the demand for coworking spaces well into the post-pandemic future.
What does Covid-19 mean for the future of coworking in APAC?
As mentioned, Covid-19 has dealt a blow to the commercial real estate (CRE) market as a whole, including the coworking market. However, the shift towards remote work, and continued need for professional workspaces is projected to provide continued support for the coworking industry.
Before the Covid-19 health crisis, the consistent rise of coworking spaces (between 2017-2019) had already started to challenge CRE occupiers to re-conceptualise their view of traditional office spaces.
Covid-19 has only accelerated this move towards flexible work. More importantly, it has helped businesses to realise the durability of their operations despite the increased reliance on remote work systems. In fact, the decentralisation of the office and increase in workplace flexibility has allowed businesses to save on real estate and overhead costs, while empowering employees to build a healthier and more rounded relationship with work.
Large businesses have reported saving millions after going remote. For example, ‘Sun Microsystems identified savings of $68 million a year in its real estate costs, while Dow Chemical and Nortel have saved over 30% on non-real estate costs’ Similarly, telecommuting has not only saved employees valuable time, it has also allowed them to save on transportation and other miscellaneous expenses.
With these considerations in mind, coupled with the fact that there is no foreseeable end to the Covid-19 crisis, more businesses are shying away from expensive long-term commercial leases in favour of short-term arrangements.
While businesses have been quick to recognise the inefficiencies of traditional workspaces (particularly amidst the fluctuating Covid-19 situation), managers are also concerned about where the social and professional needs of their employees are catered for.
This dilemma positions coworking spaces as an ideal in-between solution where employees can reap the benefits of flexible work, while being able to access professional workspaces that cater to their specific needs and preferences (e.g. location, utilities, working environment).
The reinvention of the CRE market
Let’s take a look at what the future holds. According to McKinsey, ‘More than 20 percent of the workforce could work remotely three to five days a week… If remote work took hold at that level, that would mean three to four times as many people working from home than before the pandemic’. Additionally, according to JLL (based on 2018 estimates), 30% of all CREs will be dedicated to flexible workspaces.
More crucially, top business decision makers have expressed a willingness to make accommodations for remote work. Whether willingly or grudgingly, business leaders have to admit that a complete return to the traditional pre-pandemic 9-5 office is unrealistic, especially when the lack of flexible work accommodations has become a dealbreaker for many workers.
This illustration of the global workplace is rapidly evolving the CRE market. As huge tenants vacate multi-levelled offices in favour of satellite offices and remote work arrangements, CRE owners are left with worryingly vacant and costly professional spaces.
Flexible workspaces present a sustainable alternate solution to the difficulties faced by CREs. Making the move towards flexible work systems helps CREs to supplement the drastic downturn in tenancy and more crucially, create opportunities for increased revenue. Instead of courting the diminishing market for traditional office space, CRE owners have begun to open their doors to the growing market of co-workers.
Diverse and competitive: A new era for the coworking industry
Many coworking spaces have sought to improve upon their offerings following the blow from the Covid-19 crisis. As the coworking market grows and competes for market share, co-workers seek to benefit from both competitive price and facilities offerings.
To entice professionals to include coworking spaces into their ‘new normal’, many spaces might slash prices or partake in price wars. While not all coworking spaces across Asia might successfully weather the fierce competition, co-workers seek to benefit from low prices.
This could position coworking spaces as a much cheaper alternative to traditional offices. By funding employees’ use of coworking spaces, businesses could make significant cuts to their real estate costs, while ensuring access to top-notch professional facilities.
Telecommuting might be convenient, but it also requires a conducive environment. Home offices can often be filled with distractions and noise which can be incredibly disruptive.
Many coworking spaces in Asia have tailored their offerings to cater to remote work needs. Virtual offices and on-site IT support are just some examples of the unique offerings provided by coworking spaces.
Covid-19 remains a safety and health concern. Many might be reluctant to leave home and risk exposure. Coworking spaces have sought to assuage these concerns by introducing enhanced Covid-19 safety measures.
Many coworking spaces have instituted strict cleaning regimes, sanitisation stations and stringent safe-distancing rules so as to provide their clients with a peace of mind. Some spaces have even taken interest in the UV Light and Ionization treatment of HVAC units.
The post-pandemic economy is global, lightweight, and flexible. As Asia’s workplace culture evolves alongside the move towards high-skilled knowledge based economies, we are likely to witness a stronger demand for flexibility.
In short, the short-term pains suffered by the coworking market in APAC is expected to lead to a long-term gain in the post-pandemic flexible future of work.
Deskimo is the flexible work platform of choice that helps businesses navigate the new future of work. With us, you and your business can adapt to flexible work, and pay-as-you-go across dozens of spaces in Singapore and Hong Kong.
*Our workspaces are currently safe, open and ready for your return. Do adhere to local Covid-19 safety measures to keep yourself, and other workspace patrons safe.