Co-working Space Booms in Hong Kong as Multinationals Seek Flexibility

Hong Kong, July 26, 2017 Co-working spaces now play host to a wide variety of end users, including both large companies and start-ups, providing an innovative new platform for these two distinct parties to interact, according to CBRE’s latest report The Evolution of Co-Working: Supporting the Emergence of The New Business Eco-System.

While co-working spaces had originally targeted start-ups and independent service companies, an increasing number of MNCs are tapping into this office solution as they look to build flexibility in their corporate real estate portfolios while leveraging the innovative and entrepreneurial spirit of co-working environments.

CBRE Research’s Asia Pacific 2017 Occupier Survey revealed that 64% of MNCs occupiers plan to use some form of third party office space, including co-working space, by 2020. Cost savings was cited as a driver, followed by leasing flexibility and collaboration.

“By leasing co-working space, MNCs can save a significant amount of capital expenditure for new office fit out and take advantage of flexible lease terms,” said Dane Moodie, Director, Advisory & Transaction Services – Office, CBRE Hong Kong. “Co-working spaces allow MNCs to be more flexible when expanding or contracting their operations, especially as the leasing term in co-working spaces can be much shorter than the traditional 3 year terms offered by portfolio landlords.

Co-working space may not be suitable to all business lines within large organizations however it does offer an innovative option with a potential commercial benefit that is appealing to a lot of key operators," Moodie added.

The Impact on Hong Kong’s Office Market

As co-working space continues to grow, the sector is naturally seeing an emergence of new operators. Approximately 50 new co-working centers have opened in Hong Kong, Singapore, Shanghai and Sydney over the past 12 months, translating to 20% growth in the sector.

In Hong Kong, co-working space operators, as well as serviced offices which indicated that they have co-working elements, currently occupy 960,000 sq. ft. of office space. In the first half of 2017, these operators secured around 222,000 sq. ft. of new office supply, 35% of which were Grade A offices.

The total footprint of the co-working sector will increase to more than 1.18 million sq. ft. by the end of 2017, assuming that the new spaces open on schedule. This is a dramatic increase compared with the 700,000 sq. ft. of space occupied by co-working space in 2016 and 500,000 sq. ft. in 2013.

Emerging Opportunities for Landlords and Developers

CBRE Research believes the co-working sector is likely to experience some consolidations and merger and acquisition activities in the next one to two years. In Hong Kong, as more property developers are tapping into the co-working space market, smaller operators lacking the financial muscle to compete with larger groups may be vulnerable, especially when they are operating in a high office rental environment.  

From a landlord’s perspective, adding co-working space to office buildings can help enhance the occupancy of spare floors or older space, whilst those who have yet to launch their own co-working business must still be prepared to accommodate co-working centres as tenants. CBRE advises landlords to closely examine how leasing terms with co-working operators are structured, whether by engaging in profit-sharing agreements or paying market rents

 

 

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.​

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