How Co-Working Spaces Are Disrupting Asia's Commercial Real Estate Industry

Imagine arriving at your office building in the morning, where a friendly concierge greets you by name as you stroll past a keycard security checkpoint. On your way to a desk of your choosing, you swing by the dining area for a fresh cappuccino and some cookies. Midway through the day you relocate to the building’s rooftop atrium for some fresh air ahead of a client meeting. A few minutes later a message pops up on your phone informing you that your guest has checked in and is on her way up. Tomorrow you will book a stylishly appointed conference room, where you will review the company’s latest developments with a group of investors. Afterward, you and your partners will take over a table near a posh lounge for an extended brainstorming session, followed by catered lunch and a guest talk on IP protection. All of this is possible because your team headquarters is a coworking space. Coworking spaces are office facilities that serve established small businesses, startups and individuals. In contrast to conventional office buildings, coworking spaces present members with a range of formal, casual and unconventional working environments. They also facilitate scheduled and impromptu networking opportunities, helping shape the membership body into a coherent community. Coworking spaces are commonly located at the center of major urban hubs, making it possible for members to feed off of the dynamism of the local business scene.

What’s in it for coworking space members?

Flexible workspace: Some companies have fluid space requirements that change as the team grows, disperses across multiple locations or even contracts. Coworking spaces that make it easy for members to change their in-office headcount are especially attractive to such firms. Varied work environments: Coworking locations are divided into solo and group-based work areas, conference rooms, open lounge and recreation zones. Members have access to each of these areas and can benefit from the different work modalities. Community feel: Members come into close contact with employees at other companies on a daily basis. This creates frequent opportunities for employees to network and collaborate across their nascent organizations. Community organizers, who oversee the social calendar for a given coworking space, add value by arranging guest lectures, scheduling meet-and-greets with prospective investors, and organizing game nights and other icebreakers for members.

How have large companies embraced the coworking mentality?

Established technology firms understand that coworking spaces can foster a more dynamic and collaborative atmosphere for employees. Google, for instance, has gone a step further than most by opening its own chain of coworking locations in global hub cities, including Seoul. Others, such as Microsoft, have become keystone tenants at coworking spaces operated by third parties. In this arrangement, a select team enjoys regular access to the facility, while employees posted elsewhere in the company’s conventional offices may come in to participate in brainstorming sessions and training seminars. These companies also benefit from the added brand visibility that comes with setting up an outpost at a coworking space.

Coworking spaces: standalone and networked

Coworking spaces in Asia can be found in three formats: single locations that take advantage of their prime location at the heart of major urban centers; domestic chains made up of locations spread out across a single city, multiple cities, or even multiple countries in the region; and international brands that are well-established in other markets and are building new locations in major Asian cities. Examples of the first category include the Ministry of New, in New Delhi, Hive Arena, in Seoul, and KoHub, in Thailand. The numbers suggest that this type of setup is the most prevalent: in India, for example, 160 coworking space developers manage over 350 locations. Domestic chains like Naked Hub (China and Vietnam), The Hive (southeast Asia), and BHIVE (five locations in Bangalore) provide members with the added flexibility of working from any facility in a city- or region-wide network. Finally, international brands are dipping their toes into Asian waters; the chief example of late is WeWork, which is in the process of investing developing locations in multiple regional hubs across India. Regus, a commercial real estate management leader, offers several coworking space packages in which clients can access designated conventional office space zones within a network of more than 3,000 office buildings managed globally by the firm, including locations in Asia. However, given that the community development component is absent from Regus’ workspaces, this solution may be regarded more as a geographically flexible conventional office space offering than a fully-fledged coworking space network.

What’s in it for real estate managers?

More stable earnings and cash flows: In contrast to conventional office buildings, coworking spaces are utilized by a relatively larger number of tenants who sign shorter term agreements. Provided that a permanent member recruitment program is in place to bring in new clients as vacancies open up, a coworking space can yield more stable earnings because income is generated by a larger pool of occupants, thereby reducing the risk of unrealized earnings due to capacity underutilization. Likewise, adverse impacts on cash flows due to late payments will be mitigated by the larger number of occupants present. Higher per capita revenue: Coworking space members do not have the bargaining position enjoyed by larger companies with regard to fee and rental negotiations. While cost remains an important consideration, location and the quality of amenities provided factor heavily into the decision about whether to join. Members may be willing to pay more per headcount provided that the space meets their expectations about location, attractiveness and functionality.

Key considerations for real estate managers debating whether to enter the space

Occupancy arrangements must be flexible for members: Startups need the flexibility to change the headcount on their membership rolls as the company’s fortunes change. A team that numbers three upon joining may grow to a dozen a few months later. In order to ensure this flexibility, real estate managers must take into account the constraints imposed by the physical space itself. That is, how many single-tenant office spaces will be partitioned off and how many desks will be installed in each of them? What is the procedure for negotiating with tenants who need additional space and how are these requests prioritized? How will an ongoing member recruitment program be set up? Members expect sophisticated amenities and spaces: A coworking space’s ability to retain members—rests largely on its functionality and attractiveness. Activity-based workspaces account for the functionality aspect, and include areas for holding meetings with clients, making phone and video calls, conducting solo and group-based work and even prototyping new products. Premium amenities that further distinguish coworking spaces from conventional office buildings include perks like the micro-brewed coffee and fruit water served at DreamPlex in Ho Chi Minh City, and the rooftop swimming pool and fitness center at WeWork’s Bangalore location. Interior design ties these spaces together, giving character and atmosphere to the facility as a whole. Comfortable furniture, custom murals and professional lighting design feature heavily in defining the design aesthetic of the latest coworking spaces. Community-building services have become industry standards: A venue alone does not make a coworking space. Online messaging boards and custom apps are popular value-adds for members. WeWork, for example, provides an all-in-one app for members to communicate with one another, book rooms, receive updates from location managers, and even check how many pages they have printed during a given month. Guest talks, skills-based seminars and recreational activities are integral to the creation of a community among the membership body. 1871, a coworking space in Chicago, hosts thirty such events each month that touch on a wide range of business- and innovation-related topics. Given the extensive curating and coordinating activities required of location managers, coworking spaces bear much in common with a hospitality industry undertaking. Managers of coworking spaces and hoteliers alike both know that the rooms alone do not make the place, the customer service does. Key takeaways Location, interior design, community and amenities are of primary importance for coworking space members. The freelancers and startup team members that populate these unorthodox offices may be small-scale tenants on their own, but they form a growing contingent of the highly educated workforce in cities across Asia. Coworking spaces serve as hubs where these technology-savvy people can work, connect and unwind. Operators that are prepared to build stimulating workspaces and provide outstanding customer service are finding a receptive audience in Asia.