Are coworking spaces in Singapore here to stay?

Over 20 providers set up shop in the past two years.

When CapitaLand and Collective Works unveiled their joint venture to build a sprawling 20,000-square-foot co-working space on the 12th floor of Capital Tower, it was the latest proof that this preferred set-up for start-ups and entrepreneurs has become one of the hottest property trends in Singapore.

Flexible working spaces, especially co-working spaces in the central business district (CBD), are expanding at a rapid pace as Singapore further solidifies its role as a start-up launchpad for southeast Asia, although some property experts question whether enough start-ups will emerge in the coming years to match the swelling supply.

More than 20 co-working space providers have set up shop in Singapore in the past two years, according to global workplace provider, Regus Singapore, and the trend is set to pick up as more established businesses also take advantage of these lower-cost flexible workspace arrangements. Aside from the Capital Tower co-working space hub, the 10,000-square-foot Hub@ Cuppage is set to occupy a row of ten heritage shophouses at Cuppage Terrace and provide an array of hot desks and private offices.

Yearning for collaboration
The two most popular reasons for choosing co-working spaces are the opportunity to meet likeminded workers from different firms (82%) and to network (80%), finds a global Regus survey which included respondents in Singapore.

For start-ups, “Operating from a co-working space enables people to enjoy the combined benefits of flexibility and going in to an office, without the common feeling of isolation from fellow professionals experienced by home-based workers,” says Paul MacAndrew, country manager of Regus Singapore.

“The concept of collaborative workspaces enables business people to work alongside one another, even if they are not employed by the same firm. This can result in key business relationships being forged,” he adds.

The two most popular reasons for choosing co-working spaces are the opportunity to meet likeminded workers from different firms (82%) and to network (80%), finds a global Regus survey which included respondents in Singapore.

Entrepreneurs also favor co-working spaces because it fosters increased collaboration, which in turn improves start-up success. In the same survey, co-working spaces were seen by respondents as an ideal environment to meet and collaborate with other entrepreneurs (74%) and all respondents agree they provide the ideal atmosphere for start-ups to thrive (74%).

In the Singapore CBD, where there are high rents for traditional office space, shared co-working spaces with individual desks has become an attractive option for start-ups and freelance workers, according to a Savills report on the Singapore office sector published in August.

“Besides low occupancy costs, such premises also provide the community culture of an office space with access to professional necessities such as meeting rooms, as well as flexibility and freedom essential to the users,” the report says.

Blossoming start-up culture
Singapore has a business-friendly environment that is highly conducive for start-ups, making it the best-ranked country in Asia Pacific in the 2015 Start-up Ecosystem Ranking conducted by Compass. More than 2,400 technology start-ups call Singapore their home.

“Affordable rents, along with an established vibrant community of start-ups and the ease of access to important support services and networking opportunities, has led to it being the favored choice for budding entrepreneurs in the technology and media sectors,” says Christine Li, director, research at Cushman & Wakefield.

The Singapore government as well as corporates has been rolling out more programs to encourage entrepreneurship, which has helped build up momentum for co-working spaces.
In an effort to create an innovation-based entrepreneurial ecosystem and a more competitive national economy, the Singapore government launched the Smart Nation initiatives and has “sunk in generous resources to ensure the real estate environment is conducive for start-ups even in the land-scarce city-state,” says Li.

She further notes that aside from providing space for incubators, government financing such as the early stage venture funding (ESVF) scheme is available to local tech start-ups, with the government promising to invest S$40 million through the ESVF scheme to encourage large local enterprises to support early stage Singapore technology companies.

Enticed by such incentives and also hungry to tap into the innovations such start-ups generate, corporates are playing a bigger role in the start-up scene by launching their own innovation centres or accelerator programs. HSBC launched a financial technology innovation lab in Singapore with the help and support from the Monetary Authority of Singapore, while in insurer, Metlife launched a 7,800-square-foot innovation centre called LumenLab. DBS Bank, Accenture and Dell have also formed their own innovation labs, which will help nurture more start-ups and drive demand for co-working spaces.

“We expect an increasing number of corporations to make a concerted effort to start or expand their own innovation labs,” says Li. “Accelerator programs could also be initiated where corporates have a vested interest in the start-ups.”

Growth challenges

Even as the government and corporates attempt to further nurture the start-up scene, more pessimistic analysts still see challenges in growing more Singaporean entrepreneurs to match the growth of co-working spaces.

“In a nutshell, some challenges in the form of individual attributes, such as the intent to start a business and the perceived level of entrepreneurial capability, could slow the growth of co-working space,” says Jenny Goh, research analyst at JLL in Singapore.

She says only 9% of Singaporeans intend to set up a business within the next three years compared with the 20% in Asia Pacific, although there have been improvements in recent years as seen in the country’s continual improvement in Compass Global Startup Ecosystem Report, to become the tenth-best ecosystem for tech start-ups in 2015, rising seven ranks since 2012. Singapore is the only Asian city to make the top ten list, which is dominated by cities in the United States and Europe, such as New York and London, respectively.

“The focus of the government to create an innovative ecosystem could lift demand for non-traditional workspaces such as co-working space. The recent development of a second incubator hub suggests the government’s confidence in the underlying demand for such space going forward," says Goh.

Another challenge for co-working spaces is addressing the perception that it is not professional, forcing start-ups and entrepreneurs to recalibrate their working space arrangements.

The Regus report reveals that 76% of respondents believe the setting provided by co-working spaces is sometimes not professional enough for client meetings. Moreover, 75% of respondents say that there is a risk to privacy and that meeting room space is scarce (59%).

“All too often businesses interpret remote working as home working, but this doesn’t look very professional and can often lead to people feeling isolated,” says MacAndrew.

“Businesses must be aware that formal meeting space for important client meetings is a key requirement and that privacy needs to be protected. So while co-working spaces bring many benefits, space must be professional enough to carry out sensitive work,” says MacAndrew.

Cost-effective for businesses
 

While start-ups and entrepreneurs are driving a large chunk of the demand for co-working spaces, industry insiders note that established businesses are also starting to explore it as a cost-effective alternative.

MacAndrew reckons that incorporating co-working into a business’s long-term plan is not only seen as a cost effective alternative, but also helps businesses remain agile and responsive to sudden market changes.

“For instance, firms looking to move in a new direction can use a co-working space to test the waters before making any concrete changes. On the other hand, if conditions in a particular market take a turn for the worse, downsizing will not incur the hefty penalties associated with traditional leasing arrangements,” he says.

Standing out

Looking beyond Singapore, 78% of co-working space operators in Asia-Pacific plan to expand this year, which suggests that the trend is gaining ground across the region, says Cynthia Chan, manager, office specialist, Asia Pacific Research at CBRE.

She notes that most facilities in Asia-Pacific are created with a focus on a specific sector and hence the current trend leads them to create customised interiors and fit-outs designed to appeal to certain targeted industries, primarily those in the technology, e-commerce, consulting, media and advertising sectors.

Operators are starting to feel the competition and are working to stand out by opening more centres, leasing larger spaces and moving to prime areas to improve the co-working experience.

“The key to running a successful co-working space is creating an experience; building a community; and facilitating business and learning opportunities for end-users,” says Chan.

“Co-working space operators should focus on building their brand to recruit new users; improve their provision of amenities, creatives shared spaces and value-added services and events; and engage the community in their centres to retain members.”

Meanwhile for developers and landlords, the key to riding on the co-working space trend in Singapore and across the region is to look into matching the unique requirements of the operators.

“Flexible working operators taking up ample space will benefit developers with high vacancy rates or with buildings under construction hoping to pre-let,” says Zac Tang, analyst, research & advisory, Asia at Colliers International. “However, if a flexible working space operator’s clients do not fit with a landlord’s existing tenant mix, problems may ensue,” warns Tang.