This segment is expected to further disrupt traditional real estate markets
by AKMAR ANNUAR
FOR the past decade, co-working spaces are increasingly becoming offices of choice for gig workers, freelancers, small start-ups as well as micro, small and medium enterprises (MSMEs).
Now even larger companies are joining the bandwagon, trying out something different from the traditional office space.
According to CompareHero, this segment is expected to further disrupt traditional real estate markets “that involve rental of time, equipment and space”.
In Malaysia, bio-gas developer Cenergi SEA Bhd has been using co-working space Common Ground Ara Damansara as its main office since October 2018.
Its head of corporate affairs Azana Fariza told The Malaysian Reserve (TMR) that after a thorough comparison of costs between a traditional office space and a co-working one at the end of Cenergi’s previous office tenancy, they found more appeal in the latter as it provided the convenience of moving into a fully furnished space.
Highlighting the positive changes in work culture and productivity, Cenergi noticed positive changes in communication across teams with the flexible seating arrangements allowing for movement as needed during stages of project development.
Azana said this signalled to the management that teamwork is now occurring both frequently and naturally.
Meanwhile, business owner Leonard Khoo chose co-working space over the traditional office set-up as it is more cost-effective, especially for his small team of less than five people.
“It is more cost-effective for my team because furniture, utilities and cleaners are all-inclusive in the membership,” he told TMR.
He added that for new businesses, it is less risky because there is no long-term commitment and it is convenient to get the business up and running.
“There is no renovation and prep work needed to be done on our end,” Khoo elaborated.
He said business owners can benefit from networking with other businesses that are sharing the space to improve their sales and look for potential collaborations, among others.
“Also, I noticed most co-working spaces have strategic locations,” he noted.
On the other hand, creative agency co-owner Raja Nadia Raja Ahmad Tajudin Shah said her company actually had its own office when she started going to Common Ground Jaya One.
“I just wanted a different working environment and a change of scenery at the time,” she said.
Just like Khoo, she believed that co-working space was a great option because of its low move-in cost to a beautiful office space and a great opportunity to meet new people and build networks.
Furthermore, a co-working space presented to them an instantly upgradable space for expansion needs to accommodate their rapid company growth.
Malaysia’s urban Korean food restaurant chain K Fry has been occupying two suites at Colony in KL Eco City since October 2018 to reduce the effort and costs that go into upkeeping a traditional office space.
Enhance Productivity, Meeting Planning
“All these would require quite a hefty investment for a single organisation but are affordable when shared,” he said.
Petronas subsidiary Petronas Dagangan Bhd (PetDag) had also been renting a co-working space in Kuala Lumpur since August 2018.
“We have been able to minimise our spending on meeting room rentals,” it said.
PetDag saw the mix of start-ups and giant corporations in the co-working space as a win-win situation as they can learn from each other.
“Giant corporations can learn to deliver more meaningful innovations to customers from start-ups while the latter can leverage on the stronger infrastructures of the former to scale up,” it said in a statement recently.
PetDag advised companies, regardless of size, look for areas in their organisational culture that need improvement and evaluate whether a coworking space may spur the positive changes sought.
Meanwhile, used car trading platform Carsome, which rents at Colony Mutiara Damansara, found that co-working spaces took the hassle away from administration-related matters.
“When that ‘burden’ of paperwork is off our hands, then we could focus on growing the company,” it said in a statement.
AirAsia’s cargo and logistics platform, Teleport, reported that their employees were more productive with regards to output and were happier in the co-working space overall.
“We have been influenced to change our own administrative and human resource roles to be more proactive and people-centric,” it said in a statement.
It also noticed the change in environment and reminded employees how their work environment can be dynamic and ever-evolving, thus they themselves must be adaptive and not complacent.
Meanwhile, co-working space WORQ reached a milestone with 80% occupancy for their upcoming fifth and largest outlet in KL Sentral, turning the location profitable from day one.
According to WORQ, the new site was 60% pre-sold even before the renovation started and since the inception of the brand, it has consistently maintained occupancy above 90% across all locations.
KL Sentral’s outlet houses an unnamed multinational company’s office in Malaysia, whose workspace was developed by a custom-built solution produced by WORQ’s Enterprise Division, a new arm created to service large headcount demand.
This multinational firm joined a growing group of large companies that are incorporating WORQ’s office solutions, whose client lists boasts global advertising company WPP Group, for which it had built a solution for their 500 employees in its fourth outlet.
WORQ’s CEO and co-founder Stephanie Ping shared with TMR some of the large companies that chose to work at WORQ, which include PhillipCapital, HRnetGroup, Sibelco, Telum Media, LingoAce, Maybank, Alliance Bank, DHL, Saint-Gobain, Pertama Digital, Keypath Education, UOB, Singtel, RWDI and Coda Payments, among others.
Co-Working Space Allows Companies to Scale Up, Down Quickly, Economically
In hindsight, Ping said one of the reasons that more companies are opting for co-working spaces was due to WORQ’s and other co-working spaces’ solution of allow- ing these companies to scale up and down quickly and economically.
“In a post-Covid world, companies need to be more agile, company team sizes need to be able to scale and change quickly, without having the restriction of a fixed space such as that of a traditional office.
“Our Space-as-a-Service (one of the services provided) also removes the hassle of owning and managing real estate from companies,” she said.
She added that compared to traditional office leases that are fixed in size and of long-term nature, having to fit a company’s headcount sizes into a pre-set space is no longer needed with WORQ’s on-demand solutions.
“For companies with large headcount sizes who need a bespoke designed office but for a shorter tenure, WORQ’s Enterprise Solution can provide that solution.
“Completely customisable from the selection of location, to special requests for custom amenities and bespoke design tailored to the customers’ identity, WORQ takes away the headache of sourcing, renovating and managing an office space which allows companies to focus on their core business,” she explained.
A WORQ customer, APAC Finance and SEA Operations for Keypath Education head Xavier Arvind David concurred her notion.
More Than Just an Office Space
In this sense, Keypath Education viewed the co-working space as more than just an office space provider, but also a business partner it can rely on.
On the challenges of managing the co-working spaces pre-Covid and post-Covid, Ping said during the early days, many people had not heard of flex spaces or co-working.
“It was hard to explain the concept and there were many misconceptions about it. Many people thought that this form of using real estate is reserved only for start-ups, freelancers and gig economy,” she recalled.
As such, she said it was difficult to raise money in the first few years as the idea was not fully fleshed out in the public consciousness then.
“However, a few insightful investors who could foresee the future chose to invest in WORQ, including a venture capital firm with more than RM2.7 billion in assets under management with 500 start-ups under them,” she said.
Some of these investors include Space Matrix, Cradle Fund, the founder of Buxani Group, a real estate fund founded by Kishore Buxani and Huang Shao-Ning, a co-founder of JobsCentral.
WORQ has now become one of the largest co-working and flex space providers in Malaysia with a profitable track record since 2017, when it first opened.
Moving forward, co-working space will become the mainstream way of using office spaces, as international real estate consultancies such as JLL and CBRE are predicting that 30% of all office spaces used will be flexible in the long run.
According to CBRE’s 2022 Spring APAC survey, 70% of businesses are expected to be using some form of co-working space by 2025.
Half of the landlords have said that 25% of their office portfolio will be allocated to flex spaces, according to The Instant Group, a workspace innovation company.
Meanwhile, a National Property Information Centre report said there are 33 million sq m of vacant office spaces in Klang Valley as at 2022.
The growth of co-working spaces will transform many of these vacant spaces into vibrant workplaces with the potential to reduce the overhang by up to 20%.
Ping estimated as much as RM2 billion of property appreciation can be salvaged from revitalising these underutilised assets.
One of WORQ’s early supporters and repeat investors, PhillipCapital Management CEO Linus Lim Wen Sheong said WORQ’s ability to foresee market needs and strategically navigate puts the co-working space one step ahead.
“Their proven business model can scale across Malaysia and the rest of Asia.
“Their strategic decision to serve the mass market by providing a value-for-money solution has the potential for garnering the highest market share,” he said.
Global design firm Space Matrix CEO Arsh Chaudhry also observed WORQ’s consistently profitable model means every outlet generates cash flow.
“With every new expansion, their financial ability to expand increases exponentially,” he commented.
Chaudhry said this is a sustainable business model which is also synonymous with scalability.
“This is a very smart way to tackle the flex space industry,” he affirmed.
With strong unit metrics for each centre and its tried-and-tested business model that allows for a quick and profitable opening of every new outlet, WORQ is rolling out an aggressive expansion plan to triple its presence in the next two years.
By 2030, the market size of the co-working space industry is projected to grow to RM1.3 billion.
WORQ is set to conquer more than 50% of that market share, with its mid-term plans being to build up to three million sq ft of co-working spaces in Malaysia, Ping said.
- This article first appeared in The Malaysian Reserve weekly print edition