MASHIZAN Masjum designs beautiful women's shoes in iridescent patent leathers and stamped suedes. The shoes, made in Florence, sell for S$450 to S$980 under his namesake brand Mashizan. When not at his atelier in Italy, he is in his office in Singapore - a work suite at co-working space Collective Works in Capital Tower. There, the Singaporean designer and his two employees rub shoulders with a larger community of entrepreneurs and businesses. "We love interacting with other co-working space users who specialise in PR, marketing and even capital fundraising, who from time to time have allowed us to pick their brains on an informal basis," says Mr Mashizan.
"We've had so many introductions to people in the worlds of finance, marketing and PR through Collective Works. We've also had special trunk shows held here at this space for women who love shoes."
That "buzzy" feel is what drives creative minds such as Mr Mashizan to the hives of co-working spaces.
There's no denying that demand for shared office space is on the rise. Once the province of hot-desking freelancers, remote workers and "mum-preneurs", co-working space is now used by a growing millennial workforce and hoards of start-ups as well as companies looking to contain costs.
The concept is said to have started in, where else, but San Francisco, in 2005. A programmer by the name of Brad Neuberg decided that he preferred to work freelance, but still have "structure and community". He rented office space, coined a new term, and so, the co-working movement began.
The shared setting often evolves to form an eco-system for its inhabitants. With cool meeting rooms, cleaning services and coffee thrown into the mix, it's not hard to see why the 21st century breadwinner is drawn to the concept.
Increasingly, the market prospects for such office space are also drawing major investors.
Much private capital has flowed into co-working space operators globally. WeWork, the world's largest co-working business, is said to be worth more than US$20 billion, placing the New York-based company among the world's most valuable start-ups.
Singapore is "a very lucrative market now" and there is a race to become the dominant operator here, says Collective Works founder and CEO Jonathan O'Byrne.
Office landlords in Singapore, meanwhile, are welcoming these operators into swanky new digs in the Central Business District, as they cushion the fall in demand from traditional tenants such as banks and other financial institutions in the past two years.
While the number of co-working locations has mushroomed, naysayers question if the small Singapore market can support so many operators.
Woolf Works, which provided a women-only space at a rooftop office in Carpenter Street, closed its doors in April after three years. In a notification on its website, Woolf Works says: "The Singapore co-working market is exploding and it's time for us to cut our losses and leave the others to fight it out."
Those still standing have seen their occupancies ramp up and have plans for further expansion.
JustCo founder and CEO Kong Wan Sing says that the supply surge is starting to ease while demand is still increasing. "Clients who wouldn't have been open to the co-working concept previously are now interested in getting in on the action," Mr Kong tells BT. "They see the value in being connected to a community of talented and like-minded individuals and businesses. It's no longer just a workplace for start-ups, freelancers and techies. We now have members from different sizes of companies and business types including many global brands."
JustCo is set to open in Marina One, with space spanning 80,000 sq ft, in the next two months, taking its total co-working space in Singapore to 180,000 sq ft. Its operational co-working spaces here are in UIC Building, 120 Robinson Road and 6 Raffles Quay. JustGroup separately operates 130,000 sq ft of serviced offices here across five locations.
Collective Works' Mr O'Byrne notes that while much has been said about a flight-to-quality among office occupiers, the flight-to-flexibility has also become evident.
Collective Works operates 30,000 sq ft of space in two premises in Capital Tower and Cecil Street, and is in talks for multiple locations both in the CBD and city-fringe areas. It plans to add another 100,000 sq ft over the next 18 months.
Another operator, The Working Capitol, is eyeing at least three more sites in Singapore, on top of its 33,000 sq ft co-working space in Keong Saik Road and 55,000 sq ft in Robinson Road. Its Keong Saik space filled up completely within five months of opening in 2015.
"We are seeing enough demand to warrant the growth of new co-working spaces," says Ben Gattie, CEO and co-founder of The Working Capitol.
Growth in the co-working market has "definitely accelerated in the last six months", says Jeremy Lim, co-founder of Coworking Singapore, a listing platform for co-working spaces in Singapore. "Since the re-launch of our platform in February 2017, we have had an average of two new space listings requests each week from operators."
How it works
Co-working space is sold by "membership". Space in the CBD is sold in the region of S$500-750 per month, while space outside the CBD goes for S$350-450 per month, says Coworking Singapore's Mr Lim.
With rent being their single biggest cost, operators seek market rent or below-market rent for office space, industry sources say. Many prefer to secure locations from landlords before the building is completed to snag large contiguous spaces, get discounted rates and gain exclusivity within a building.
As office demand weakens and rents soften here in the past two years, many co-working space operators have jumped on the opportunity to expand in the CBD.
How quickly they make money depends on what else they're selling. Some are reporting breakeven in as early as six months to as late as 18 months. Alternative revenue sources such as food and beverage (F&B) outlets and low overheads may help an operator hit breakeven at an occupancy of as low as 60 per cent, while others may require a critical occupancy as high as 80 per cent.
The Working Capitol, for instance, also rents out space to F&B outlets at its locations. This enabled it to achieve operational breakeven within six months of opening and profitability within two years, says Mr Gattie.
Some 65 per cent of The Working Capitol's revenue comes from selling membership for workspace, while the F&B component makes up about a quarter of its revenue. The rest of its revenue comes from sales of event tickets, value-added services, media room bookings and so on.
An investible class?
Infusions of private equity are helping to fuel the rapid expansion of some operators. Homegrown JustCo has been able to double the amount of co-working space it operates globally over the past year with funding from French private equity firm Tikehau Capital Partners and Singapore-based Pinetree Capital Partners. It also announced this week a merger with China's naked Hub, which operates 11 co-working locations in Shanghai, Beijing and Hong Kong.
Co-working giant WeWork, which is looking to enter Singapore as it bets big on Asia, is said to have raised over US$1 billion this year in new private capital. Chinese companies have also moved in on the market. Among them is 5Lmeet, a start-up co-founded by former China Vanke vice-chairman Mao Daqing, which raised 100 million yuan (S$20.2 million) from investors that included Singapore's sovereign wealth fund GIC.
But are co-working spaces meeting their projected rates of returns? What would the exit options be for investors?
Co-working stock in the Asia-Pacific stands at 10 million sq ft, as at the first quarter of 2017, lagging behind Europe's 20 million sq ft and the US at 40 million sq ft, Cushman & Wakefield estimates.
In Singapore, co-working stock totalled 566,000 sq ft as at June, up from about 400,000 sq ft at end-2016, CBRE head of research for Singapore and South-east Asia Desmond Sim estimates. He expects this to grow to 700,000 sq ft by year end, though this would still make up less than one per cent of total office stock islandwide.
The financial performance of most privately run operators is, at the moment, opaque.
Serviced office space giant Servcorp, listed on the Australian stock exchange, and London-listed IWG that owns the Regus brand have been dominant players in the serviced office arena before officially branching into co-working spaces. But their moves suggest that co-working spaces are biting into the share of serviced offices, some observers say.
For the retail real estate investor looking to take a stake in the future economy, there don't seem to be many options available. Co-working operators are unlikely to be bundled into Reits given the fact that they do not usually own the space, says CBRE's Mr Sim. And most, even the biggest, are privately held.
The business may also be difficult to evaluate. Mr Sim notes that occupancy rate, a widely used parameter, may not be the best yardstick to measure a business that sells memberships.
Mr O'Byrne points out that Collective Works is "quite technical" in how it works out its occupancy rate, going by a one-to-one basis for dedicated desks and an hourly basis for hot-desks according to the number of hours in a day and number of working days in a month. An access card system allows it to calculate how many hours members spend on-site.
He believes that it may be possible to structure co-working spaces globally into a business trust, which would serve as a better hedge for investors than to put money into a single-location operator.
Landlords enter the fray
Yet, there are signs that the co-working concept has moved out of hipsterdom and landed firmly in the mainstream. Recently completed commercial projects such as Guoco Tower, OUE Downtown and UIC Building, and projects under development such as DUO Tower, Marina One, and Frasers Tower have each secured a co-working space or serviced office provider.
Some developers have also joined hands with operators to manage shared workspaces.
Besides its joint venture with Collective Works last June to open the 22,000 sq ft space at Capital Tower, CapitaLand partnered China's UrWork to operate in two CapitaLand malls in China. It also inked a partnership with Vietnam's Toong early this year, which is operating in The Vista, CapitaLand's integrated development in Ho Chi Minh City.
City Developments Ltd took a 24 per cent stake in China's Distrii for 72 million yuan in January. Distrii will open its first overseas co-working space in CDL's Republic Plaza spanning over 60,000 sq ft from the first half of 2018.
Keppel Land, meanwhile, runs its own 6,500 sq ft co-working space called Workspace at Keppel Towers, which is fully occupied. It has also launched KLOUD, a "serviced co-office" spanning 18,000 sq ft at Keppel Bay Tower, which comprises 70 per cent office suites and 30 per cent co-working space.
"With the uptrend of serviced co-offices and co-working space, we will be expanding the serviced co-office to our other commercial developments," says Keppel Land general manager of marketing Albert Foo.
Sigrid Zialcita, Cushman & Wakefield managing director for Asia-Pacific research, expects more office landlords to experiment with their own offerings or seal partnerships with established providers. "Co-working concepts are still in expansion mode and new office supply presents an opportunity for operators to defend or increase their market share."
Some co-working operators have differentiated themselves by sectors. Lattice80 targets fintech start-ups; District6, the newest co-working space here at Odeon Towers City Hall, is aiming at real estate-related start-ups for its 10,000 sq ft space.
But being gender-focused did not work out for Woolf Works, the women-only space that closed earlier this year. Ms Zialcita notes that as with all businesses, it is important to reach a critical mass to survive. And the unfortunate reality is that women in Singapore's start-up scene remains under-represented.
Successful co-working requires "a lot of programming", says CBRE's Mr Sim. "It's the ecosystem, the sharing sessions, the networking sessions. It is not just having the right hardware but building the right software as well."
Collective Works, for example, has a collaboration with PwC Venture Hub called the Expert Residence Programme, in which PwC consultants are available at Capital Tower three days a week to provide accounting and financial advisory services to members.
And should their members feel bent out of shape, they can call on chiropractor Gary Tho, who rents a studio at Collective Works and is available for booking every Thursday. In return, Dr Tho says that being surrounded by many companies provides him a test-bed "to create changes in corporate health and wellness perspectives".
For Lorenzo Petrillo, founder and director of Lopelab, a design studio specialising in space design, the main reason for his operating from The Working Capitol in Robinson Road is flexibility in contract duration and ability to ramp up space as the team grows.
"Sharing the space with many other start-ups and companies means being constantly networking and able to hear about what's going on outside our main business," he says.
The future of work
The co-working market is still nascent, no doubt. But trends are building and fast. Large corporates are increasingly willing to trade sterile offices for hip spaces. Corporate co-working is going mainstream in gateway cities across regions as prime rents continue to soar, Cushman & Wakefield's Ms Zialcita notes. The cost of conventional office space is almost 50 per cent higher than co-working space in Hong Kong, and nearly 25 per cent higher in Singapore.
HSBC relocated 300 staff in its digital and transformation teams last year to a WeWork hot-desking site in Hong Kong's Causeway Bay, a move which is said to have saved the bank over HK$23,000 (S$4,020) annually per person.
In Singapore, Unilever is operating its own co-working space, LEVEL3 at Mapletree Business City, to tap the start-up community to encourage innovation and create partnerships. And Lendlease moved 100 of its 150 headquarters employees in Singapore to The Work Project's co-working space in OUE Downtown as an interim measure, ahead of a planned relocation to Paya Lebar Quarter next year.
With disruption and uncertainty becoming status quo for businesses, workspaces have to be flexible to handle the more transient needs of the gig economy.
Clearly, the future of work must be agile and adaptable. For that, co-working space seems to be ticking all the boxes.
What is co-working space?
- Co-working space is open-plan office space offered to users on a desk-by-desk basis, with shared facilities including pantries, dedicated event spaces and meeting rooms.
- The space is sold by membership on a daily or monthly basis.
- It is not the same as incubator space, where start-ups occupy space either at nil or low cost.
- Serviced offices, which have existed for much longer, are more insular and private as the user leases a lockable office.
- Many co-working operators offer hot desks or dedicated desks as well as office suites within the same location.
- There are now 55 operators managing a total of 90 co-working spaces in Singapore, based on the estimates of Coworking Singapore, an online listing platform of workspaces. The largest operator in Singapore is believed to be Regus, a Luxembourg-based group founded by billionaire entrepreneur Mark Dixon. With 28 different locations, Regus’s spaces run the gamut from office space in public libraries to grade A office buildings.