Rise of the shared working concept

It`s called “co-working” and it is making a lot of people nervous. Why? Because it is a concept that reminds us that rapid advancements in technology are diminishing the need for operational space.

In an age when storage is in the cloud, companies are looking at cost-cutting measures and our workforce is becoming increasingly diverse and mobile, the idea of co-working spaces is not only attractive, it has the potential to completely overhaul the way we work – and this could put a sizeable dent on the demand for commercial real estate.

The co-working concept proposes that individuals or groups from different organisations can share a single working environment, often an open office or business lounge set-up that is fully equipped with modern facilities. It has particular appeal among freelancers and jet-setting businessmen, but it is also rising in popularity among a new breed of entrepreneurs who are capable of running an entire operation from their laptops.

Despite being a fairly new industry, global research firms cite that it enjoyed between 35% to 40% growth worldwide in 2015, with more than 7,800 new co-working outlets set up within a year. In Asia, the concept is developing more rapidly with 56% growth last year.

Global numbers are expected to hit some 37,000 by 2018, according to leading business publications, culminating in 89% growth by 2020.

By and large, co-working is viewed as being frugal, dynamic and forward-thinking. However, from the Malaysian perspective, it could be a case of an opportune concept at an inopportune moment.

This is because our market is currently not facing a shortage in work space, but a surplus.

On the surface, it may seem like co-working spaces could pose a serious threat to the traditional office space, but there are those who believe the opposite is true.

“Actually, the growth of co-working spaces could very well boost the demand for office space,” said Nicholas Holt, Knight Frank’s head of research for Asia Pacific.

“It is a concept that has particular appeal among up-and-coming entrepreneurs, and it is really being utilised in the incubation stage of the business cycle. So when you think about it, such facilities would promote more start-ups as it would reduce the upfront cost. And, should these individuals find success, they would inevitably require more operational space to expand,” he said.

As operations grow larger, Holt said they would certainly require more space for staff, to store equipment or even entertain clients. Co-working spaces will encourage new business ideas and services to enter the market, and this is ultimately very good news for the office subsector.

“Don’t forget that the co-working outlets themselves require space to operate,” Holt added.

InvestKL CEO Datuk Zainal Amanshah agrees that co-working spaces are a positive development, saying such facilities would promote the growth of SME’s in the country.

“I see co-working facilities as being complementary to our office market. They will also promote an influx of fresh ideas into our economy. Hopefully these small operators will someday grow to become large Malaysian corporations,” he said.

Co-working centres provide an ideal platform for networking with like-minded individuals.

Co-working outlets are already mushrooming in the Klang Valley, particularly within vibrant social and commercial centres.

A co-working outlet called Uppercase in Bangsar has garnered positive response from users since it opened in March this year. Soon, it will have competition from another outlet located nearby called WORQ, which is expected to open by the end of the year.

“The idea is not entirely rare. We’ve seen this new commercial trend emerge in the west and an now increasingly in parts of Asia, especially with tech businesses. The acceptance for the concept of co-working is growing. We are seeing more and more people opt for this as an alternative workspace,” said CEO of Uppercase Ee Soon Wei.

“It’s much less of a hassle to set up, and allows the flexibility to choose and add services as and when needed. It reduces decision fatigue. Most of all, time is the biggest savings for these tenants (known as members), allowing them to focus on the actual work rather than a constant to-do list about office operations,” he added.

Co-founder of WORQ Stephanie Ping adds that co-working spaces eliminate hefty set-up costs and long term rental contracts.

“We believe that creating a sense of community is also vital to success. Real estate is only 20% of the business. Members can also leverage on each other’s strengths and connections to create new opportunities,” Ping said.

The Kuala Lumpur Journal Hotel in Jalan Beremi does not house a conventional business centre but a co-working space called the Workers Union.

“Workers Union started with some resistance as it was still a fairly new idea here, but it soon caught on. Although it is not running at full capacity as yet, we are positive that things are looking up,” said its marketing executive Nadine Dargham.

 

The meeting room at Workers Union at The Kuala Lumpur Journal hotel.

She points out that a wide range of facilities are at members’ disposal, such as LED projectors, AV sets, meeting rooms, flip charts, flat screen TVs and teleconferencing facilities as well as high speed WiFi. There’s also coffee on demand.

Deloitte, the United Sates-based multinational professional services firm, noted in a recent survey that due to the growing importance of the service sector, knowledge intensive careers and digital technology, more people are looking to work in a mobile and unrestricted basis.

Not only favoured by small-medium enterprises, the list of blue chip companies offering flexible working location is growing. These include Deloitte, Dell and American Express.

Furthermore, the Harvard Business Review reported that employees who work from co-working spaces are about one point higher on levels of thriving compared with their traditional office-bound counterparts. They feel they are more in control, feel a sense of identity with their work and sense of community with fellow co-working space members.

Dargham from Workers Union believes this has something to do with the vibe and ambience that is provided. The layout of Workers Union features an al-fresco area, a bar that operates after 5pm, access to the hotel’s café services, books and chillout spots on top of meeting spaces – minimalist, relaxing and modern.

The growth of the concept in Asia has been particularly impactful. During the aptly named Co-working Unconference Asia 2016, key points shared from a survey by Deskmag found that more co-working spaces reported profit and a higher numbers of new entrants compared to Europe.

Currently, 78 per cent are looking at expansion, half of which are looking at opening new branches. Asia’s competitive commercial rental rates certainly encourages this, with Asia’s co-working spaces reporting lowered expenses for members compared to spending on office rental.

“The co-working trend in Malaysia is still at its infancy but it will continue to grow as more people adapt to the sharing economy,” said Ping from WORQ.

She believes that as a resource, both tangible and intangible, it will become more accessible, and the change enabled by the advancement of mobile and communications technologies will soon be adopted not just by start-ups and freelancers but also to large corporations and traditional businesses.

While Ping thinks co-working spaces could ultimately threaten the already downcast trend of traditional office space, Ee of Uppercase isn’t so sure.

“The traditional corporate setting will continue represent a large percentage of the workforce, but with the growing trend of co-working spaces, I think we will soon see that the two concepts could co-exist side by side,” he said.