Coworking— a game changer in office space
By Cecilia Chow / The Edge Property | April 8, 2016 10:00 AM MYT
Collective Works is now on the radar of most office landlords in the CBD when it was announced on March 23 that developer CapitaLand has formed a 50:50 joint venture (JV) with the coworking space operator for a new 22,000 sq ft premium centre on the 12th floor of Capital Tower.
The 254m-tall, 52-storey Capital Tower is a landmark office building at the corner of Cecil Street and Robinson Road. According to CapitaLand Singapore CEO Wen Khai Meng, its aim is to create a test bed for premium coworking space at Capital Tower, and it will be the first such offering in a Grade-A office building in the CBD. When the space is completed in June, it will be able to accommodate 250 companies.
According to Wen, the JV company will lease the space from the landlord, CapitaLand Commercial Trust, at market price on commercial terms. Collective Works, a coworking pioneer and leading operator in Singapore, will manage the space on behalf of the JV, he adds.
The asking rent at Capital Tower is about $10 psf a month, according to Corporate Locations in its March report. “Only 50% of the coworking business is the space, the other 50% is the community,” says Jonathan O’Byrne, founder and CEO of Collective Works. “Coworking is like the Uber of office space. You only pay for what you use for as long as you need the space.”
O’Byrne sees coworking as a way of exploiting the inefficiencies in the traditional office space to create greater efficiencies and optimising its use.
Collective Works is typical of the small high growth companies it targets as members in its coworking space. Thirty-year-old O’Byrne continues to work out of his coworking space at The Globe, a 15-storey Grade-B office building at the junction of Cecil Street and Boon Tat Street, where he first started the business in December 2012.
CapitaLand has partnered with Collective Works to turn the 12th storey of
Capital Tower into a high-end co-working space.
As a coworking space operator, Collective Works signs a master tenancy agreement with the building landlord and fits out the space as well as the add-on facilities and services. It assumes the real estate risks. But it derisks the real estate holding costs for the users, says O’Byrne.
The master lease is fractionalised and sold as a membership based on a monthly subscription. For instance, coworking memberships at Collective Works starts from $240 per person a month for hot-desking. Dedicated memberships are from $800 per person a month, while premium memberships that include the use of private studios start from $1,000 per person a month. Members of Collective Works will be able to use all future locations in the Collective Works Network. Members will also be able to use the other shared spaces, such as meeting rooms, video conferencing facilities, the pantry/ coffee bar and the lounges, as well as have access to events and the British Chamber of Commerce network.
“I started Collective Works because I saw isolation being one of the major challenges of small businesses and found a way of fixing it,” says O’Byrne. He came to Singapore in 2010 at the age of 24. Prior to that, he worked for two years as a communications specialist for an industrial corporation in Oman.
When he came to Singapore, he started a branding and PR company called NuCo, with clients in Singapore and the Middle East. After two years, he was “commercially very successful, but personally very unhappy”, he recounts. “I knew I wasn’t alone. I kept meeting people in Singapore who are entrepreneurs, but they weren’t quite prepared to make that jump from a home office to a proper office space as the risk was huge, especially if they had other financial commitments — for instance, children and a mortgage.”
When he was shopping for office space, he started thinking of ways he could derisk the whole process of getting an office space, without the upfront costs and being tied down by a two- or three-year lease. After searching for six months, Collective Works started with just one floor — the 14th level of The Globe.
O’Byrne: I started Collective Works because I saw isolation being one of the major challenges of
small businesses and found a way of fixing it
To start Collective Works, O’Byrne shut down the profitable NuCo and put all the money as well as his entire savings into the coworking business. “It took everything I had,” he recounts. That was in 2012.
“We opened with no clients, but I believed that this coworking space had to exist,” he adds. By June 2013, the floor was full, and within the next 24 months, the company had taken up five floors with total space of 11,000 sq ft. Today, its membership at The Globe is almost fully subscribed. It now occupies about 25% of the office space at The Globe, making it as big an anchor tenant as Thai Airways, which occupies the first three levels of the building.
He has continued to reinvest in the business over the years and is constantly looking at ways to optimise space use. Given the high cost of real estate in Singapore, “it’s incredibly wasteful to have parts of a floor that are unutilised”, he says.
Some of the high-profile start-ups at Collective Works include online restaurant reservation app Chope, which secured its Series B funding while at the coworking space at The Globe and moved out after nine months when it outgrew the space.
ReFUEL4, a technology partner of Facebook, has been at Collective Works for over two years. The company was co-founded by Singaporean Vernon Vasu, a lawyer by training, an ex-civil servant with the Health Promotion Board, former managing director of Batey Ads Malaysia and, prior to that, a specialist in trade policy at the Information Development Authority of Singapore.
When ReFUEL4 first started, the company rented space in a conservation shophouse for a year. “It wasn’t a very usable space and had uneven floors. We didn’t want to spend too much time managing the space,” says Vasu. “So, we looked for a coworking space as it also provided a social element.”
Since the company moved into Collective Works in 2014, it has tripled in size, from five staff to 15 today. It started with hot-desking and took up a studio when the company grew. Then, it expanded into two suites. Now, the company occupies an entire floor and it intends to stay for the foreseeable future. “Coworking is ideal for small high-growth companies like ours,” says Vasu. “We want to focus on growing our business and not managing an office.”
The wet conference room and diner on the 14th floor of Collective Works at The Globe on Cecil Street
‘The future of workspace’
Larissa Murphy, co-creator of Contrast Global, a design firm that specialises in commercial office space, is also operating out of Collective Works. Murphy was previously a director of HBO+EMTB. “We chose coworking because we think that in the future, everybody will work in such spaces,” she says.
Murphy likens coworking to a gym membership. “In the future, a coworking membership will be like a gym membership. You will be able to go to the coworking centre that is most convenient for you,” she says. “It will make life a lot easier and will definitely be the workplace of the future.”
Founded in June last year, Contrast Global has been working out of Collective Works at The Globe since last September. “It’s much more cost-effective,” says Murphy.
Contrast Global had done its homework and tested a lot of coworking spaces before deciding on Collective Works. “Some of the coworking spaces looked very beautiful but weren’t functional,” she observes. “And some of them were designed as social spaces, which is important in a coworking space, but they were designed more for socialising and not for work.”
Besides Collective Works, other coworking operators include JustCo at 120 Robinson Road and 6 Raffles Quay, The Hub Singapore on Prinsep Street and The Working Capitol on Keong Saik Road.
Will coworking space be the solution for office landlords suffering from high vacancy? “Absolutely not,” says Chris Archibold, JLL head of markets. “It definitely opens up a new market segment, especially in Singapore, where the government is encouraging entrepreneurship.”
Government agencies are also in the coworking space. For instance, JTC and SPRING Singapore, which launched JTC Launchpad for incubators and start-ups in the biomedical, IT and media industries at one-north. It is also known as Block 71 by its tenants and expects to house 750 start-ups by 2017.
“There’s a market for coworking globally and certainly in Singapore,” adds Archibold. However, he feels that the coworking segment in Singapore is limited by a number of factors, including the limited population and “a bit of the iron rice bowl mentality” as the preferred jobs appear to be in the civil service sector.
For developers and major office landlords in Singapore, the priority will still be to lease the brand-new Grade-A office space to blue-chip corporate tenants, says Peter Andrew, CBRE director of workplace strategies in Asia.
However, landlords are more willing to look at how they can reposition their Grade-B or Grade-C buildings and to give it an edge to differentiate the space. “But the coworking market is price-sensitive and the operators are not necessarily going to have the big bucks,” says Andrew.
Keppel Land has introduced a 6,400 sq ft hybrid serviced office and coworking space at Keppel Towers in Tanjong Pagar. It offers flexible shared office space ranging from fully furnished office suites to hot-desking workstations on short- or long-term leases.
Called Workspace at Keppel Towers, it is managed by Keppel Land. In the six months it has been in operation, it has achieved an occupancy rate of about 80%, says Tan Swee Yiow, Keppel Land’s president for Singapore. “Moving forward, we are looking to expand the coworking space at Keppel Towers and explore similar solutions at our other office buildings in Singapore as well as overseas markets.”
What will really affect the evolution of coworking space is a mobile application that can connect people who want a coworking space for a day, a week or a month. “If there’s an app that can list all the coworking spaces similar to Uber or Airbnb, where you can choose the one that you want, book it and pay for it, that will be quite transformational,” says CBRE’s Andrew.
While coworking space is not going to solve the vacancy issue in the office market, it will encourage a move towards greater efficiency, adds Andrew. Currently, in Singapore, about 80% of the coworking space is outside the CBD. “In terms of the impact on office leasing and rents, it is largely a space filler in office spaces, mainly Grade-B buildings,” he says.
About 2% of the total available office space in Singapore is occupied by shared space, which includes coworking space and serviced offices. “It’s quite significant, given that coworking is at a nascent stage,” says Andrew. “However, the impact on Grade-A office rents is marginal.”
Nevertheless, O’Byrne of Collective Works is confident that coworking will grow exponentially in Singapore. He sees Singapore as an ideal hub in Asia-Pacific for financial technology companies, which will require coworking spaces.
“There’s a misconception that coworking is only for start-ups,” he says. “At Collective Works, we have a couple of unicorns — small companies that are valued at over US$1 billion ($1.4 billion). They continue to work in small teams and to embrace the ethos of coworking.”
This article appeared in the City & Country of Issue 723 (April 11, 2016) of The Edge Singapore.
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