- A new report by Cushman & Wakefield shines the spotlight on the Asia Pacific coworking market.
- Research reveals 40% growth in memberships, well above the global average.
- Demand from corporates has been one of the biggest expansion drivers of coworking in Asia.
Published this month, Cushman and Wakefield’s latest coworking research, “Asia Pacific Coworking Trends: Space is Now a Business Solution”, closely examines the key factors that are powering the growth of coworking and shared workspaces in APAC.
The Asian coworking market has boomed over the past couple of years. Even back in 2015, the pace at which coworking was growing in the region was astounding.
“Coworking in Asia, China specifically, is making coworking in the US look like it’s standing still,” Liz Elam, Executive Producer of GCUC, said after the first GCUC China edition in 2015. What Elam said remains true even today, and not just for China.
According to Cushman & Wakefield’s research, “with memberships growing at a higher than global average of 40%, coworking operators have been an important demand catalyst across Asia Pacific.” In fact, the shared workspace industry has leased more than 8 million square feet over the last two years.
6 Trends Driving the Growth of Coworking in Asia
Cushman & Wakefield has identified 6 trends that have powered the growth of shared workspaces in the APAC market.
1. Coworking is Going Corporate
Similar to the US and Europe, large corporates in Asia are using coworking spaces to attract and retain talent and to further business growth. “Demand from corporates has been one of the biggest expansion drivers of coworking in several Asian cities over the last two years. Memberships of enterprise clients have more than doubled over the last 12 months.” It’s not just large enterprises embracing the value of coworking; SMEs are also adopting the shared model to help them grow or contract as needed.
2. Developers are Making Coworking Spaces a Staple
Coworking and real estate are stronger together, and developers are starting to realize the value of offering mix-use space. “Landlords, either by themselves or by partnering with an operator, are embracing coworking concepts to give life to their buildings.” On the other side, “coworking operators (partnering with developers) get access to (…) outdoor event spaces, fitness centers, health clubs, and retail spaces.”
For these projects, developers typically invest in the real estate while workspace operators provide the design, technology, and training; this in exchange of a management fee and a portion of the profits. However, some developers are opting to go down the coworking path by themselves, creating their own coworking brands. Such is the case of CoWrks, owned by RMZ Corp.; Collision 8, owned by Aurum Land Private Limited; 3Q, owned by Soho China; and Clock In, owned by Ayala Land.
3. Coworking as In-House Innovation-Hubs
Globally speaking, the lifespan of large companies has been decreasing over the years. Cushman & Wakefield found that “only 12% of those companies have survived between 1955 and 2016. Creative destruction and market disruption are driving them out of business as they lack the dynamism and innovation that are crucial for survival in a hypercompetitive global economy.”
For this reason, large companies are either partnering with coworking spaces or building their own in-house shared workspace environment, as they recognize that these spaces foster innovation. Coworking spaces allow companies to work with developers, entrepreneurs, startups, and creative professionals that can help them build and scale up new business solutions.
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In Asia, companies like Unilever, DBS, MetLife, and OCBC Bank have all created their own in-house coworking spaces that also incorporate incubator and accelerator programs for startups using their facilities.
4. Coworking in Japan is About to Boom
Due to Japan’s traditional culture of seeking corporate employment, coworking there has not experienced the growth it has in other Asian countries. However, this is about to change. According to the report, “2018 will be transformational for the coworking landscape in Tokyo,” as Japanese companies are “recognizing that there is latent demand for coworking.” As in other Asian cities, Japanese developers are also realizing the potential of coworking, and some have already started to leave their coworking mark.
We also can’t ignore that WeWork’s entry into the Japanese market is likely to spark additional competition.
5. The Road to Expansion, Paved by Mergers and Acquisitions
“Coworking operators are merging with each other and scouting for investors in a bid to strengthen their foothold in growing markets.” This strategy allows operators to learn from mature operating models and provide a wide array of services.
However, this strategy is also useful to “fend off competition and (…) thwart WeWork’s aggressive expansion plans in the region.” Local players struggling to stay afloat need the backing of bigger operators, and bigger operators can greatly benefit from merging with these smaller players to guarantee a successful entry into a new market.
We can “expect mergers and acquisition deals to pick up their pace in 2018 as competition heats up in the region.”
6. Southeast Asia is the New Battleground for Coworking
Southeast Asia is home to some of the world’s most dynamic and fastest growing economies. Additionally, government support and funding is powering the development of startups and incubators in the region; which has consequently accelerated the evolution of shared workspace environments.
In Vietnam, a private equity firm has invested to develop a coworking space; in Indonesia, Rework has received funding from ATM Capital, and in Jakarta EV Hive has merged with Clapham Collective. Whatsmore, corporates with presence in Bengaluru, Mumbai, Gurgaon, Hyderabad, and Manila are occupying coworking spaces.
Coworking in Asia is no longer just a real estate alternative, it’s an attractive business solution for companies of all sizes. Not only is it attractive for the benefits and services it provides, but also because it is a cheaper option compared to that of traditional leases.
Coworking in Asia, as it has done in other countries and regions across the world, has successfully revolutionized the real estate market.
You can read Cushman & Wakefield’s full report here.