The number of co-working spaces is expected to grow 24% this year alone. Demand from multinational companies and start-ups is growing and the sector already accounts for 3.7 million sq ft of net lettable commercial space.
Co-working spaces tripled in less than 5 years
From 1.2 million sq ft in 2015, the amount of commercial property these co-working spaces are occupying has tripled in less than 5 years. It is difficult to ignore this sector as it rapidly becomes one of the major players in the office spaces segment of the property market.
83% of these flexible workspaces are located in the Central Business District (CBD), 12% in the city fringes and 5% in the suburbs. Out of the premium and Grade A offices in the CBD, about 5% is taken up by such co-working spaces. Most of the Grade A office spaces in the CBD is taken up by financial services, professional services, media and telecommunications, resources, energy and commodities; and consumer services.
Growth might slow down due to tighter vacancies
One of the largest flexible workspaces firms is WeWork, taking up 22% of office spaces or the equivalent of 850,000 sq ft. They are followed by IWG with 16.6% of the pie or 640,000 sq ft and JustGroup at 12.8% and 498,000 sq ft. Together, they take up more than half of the office spaces occupied by co-working spaces.
The environment is however more difficult for smaller players or single-spaces operators to survive. Most of these operators with an average floor area of 7,500 sq ft have been squeezed out or bought over by the larger players.
Some analysts think that there is still space for advancement and expansion as the penetration rate of 5% is still considered low. However, with the limited amount of space in the CDB, co-working firms might be looking at moving into the city fringes or suburbs. Some landlords may also consider launching their own co-working brands.
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