SINGAPORE, 19 June 2019 – Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, today released The Flexible Workspace Outlook Report 2019. This flagship report focusing on the new asset class of flexible workspace provides an overview of the overarching trends that are shaping the sector, implications for operators and landlords, as well as forecasts for the industry in 2019.

Jonathan Wright, Head of Flexible Workspace Services, Asia, at Colliers commented: “In 2018 we saw the highest annual growth rate in the sector across the region, with total space occupied by flexible workspace operators increasing by 35% in Hong Kong Island, over 40% in Shanghai and Singapore continued its growth story with the sector having now more than tripled since 2015. We expect the take-up from operators to continue over 2019, albeit at a slower growth rate as the sector matures and becomes more focused on specific corporate demand rather than speculative growth in the mid-tier of the sector. We also forecast significant M&A activity as the sector consolidates.”

Sam Harvey-Jones, Managing Director of Occupier Services, Asia, added: “This report offers deep insights into the shifting occupier demand and ways in which building owners and flexible workspace operators must work in tandem to create a strategic partnership that solves problems and unlocks growth. The report also provides a deep dive into the sector’s recent performance and outlook for 2019 across 15 key Asia Pacific markets.”

Key Trends in 2019

Amenitisation 
Commercial office buildings will begin to layer up with occupier-focused amenities that elevate the experience of the end user and allow for greater flexibility and choice. 

Premium design
The flexible workspace sector will create better physical product to align with the demands of the multinational corporation. 

Landlord partnerships
Building owners will increasingly become participants in the sector as a way of reacting to shifting demand trends. 

New products
New products will be pioneered to satisfy increased demand for flexible workspace from corporate occupiers and continue to change the way real estate is transacted. 

M&A 
In the short-term M&A will be driven by smaller local and regional players coming together to create greater coverage, and by operators from the US and EMEA entering the market through local partners.

Outlook for Key Markets

Hong Kong: 2019 is expected to be slower in terms of operator take-up. However, WeWork is expected to continue expansion with an estimated 650,000 sq ft in its pipeline, and with operators from UK, Europe and the US looking at the market we expect take-up to remain robust.

Singapore: We expect take-up to continue and deeper partnerships to form between operators and landlords. We should see some M&A take place, especially with international operators looking at leveraging local market knowledge as a way of entering the market. Strong demand from multinational corporations, particularly with large operators, will continue to underpin the sector.

Shanghai: In 2019, as overall economy is expected to stay slow, flexible workspace is likely to have a year of correction and digestion. We predict lifting occupation and revenue streams to be the key focus for operators, and competition over end-users to stay fierce. Some leading operators with deep pockets will not stop expanding. Since emerging decentralised office clusters should receive about 2.0 million sq m (21.5 million sq ft) of new office supply, operators are likely to select high quality buildings to be expansion targets.

Tokyo: Rising interest from larger landlords in flexible workspace is expected define the future market landscape in Tokyo. Japan’s market dynamics continue to favour local landlords and developers as they are better positioned than global operators to aggregate unused commercial office supply. We expect the net absorption from independent flexible workspace operators will remain strong at around 10% of the total, since WeWork is taking large upfront supply.

Seoul: Demand from flexible workspace operators continues to increase. WeWork, in particular, has opened 19 locations in Seoul since its entry into Korea in 2018, demonstrating the appetite for expansion in this sector. Since both local and major owner-operators are entering the flexible workspace market simultaneously, competition for space is likely to become intense.

 

Download the report here.