Even though the co-working trend has picked up pace globally, it remains a small component of the total office market in Asia, Ryan Botjer, senior managing director and China country head at New York-headquartered developer and fund manager Tishman Speyer, said at the Urban Land Institute’s Asia-Pacific summit in Hong Kong Wednesday.
Botjer, who was part of an onstage debate on the advantages and pitfalls of the co-working phenomenon, acknowledged that the “we give you space, you give us money” relation between landlords and tenants has changed.
“It [co-working] is here to stay, and it will be key to how landlords adapt and how we learn from co-working and help improve productivity and well-being for tenants, like when we focus on office air quality in China,” he said. However, he disagreed with the charge that real estate developers in the region are too slow in responding to the changing demands for office space, since the trend is only just beginning.
“To use a baseball metaphor, we are only in the first or second inning. Co-working space only makes up 5 percent in Asia. So even if it doubles or triples, the co-working space will still only be a [small] component in the office market,” he noted.
Botjer was responding to remarks made by William Lee, director for real estate strategies and development at Microsoft, who said that the developers are “way too slow” to supply modern office spaces. In his view, developers need to address the “shift of risk” from the actual tenants of office space to operators such as WeWork.
“It works like a gym membership because you also pay to use the space in different places, in this case maybe even globally,” Lee added. “The operators have to be careful if a recession comes and the space is not used.”
According to Botjer, the future of the office market in Asia will in fact be multi-use buildings, which would include traditional offices, co-working, delivery and retail outlets on the lower floors, and hospitality and residences on the top floors.
Back in April 2018, US co-working space leader WeWork said it would buy Shanghai-headquartered rival Naked Hub for an undisclosed amount. The Hong Kong-based private equity firm and property developer Gaw Capital Partners invested in Naked Hub in November 2016 which would help finance the opening of new Naked Hub workspaces across China, Hong Kong, Singapore and other key cities in southeast Asia. That expansion plan was supported by the opening of multiple locations in London in the first quarter of 2018, among them 123 Buckingham Palace Road — a Gaw-owned property currently occupied by Google.
Naked Hub, which opened in 2015 and had 10,000 members in 24 locations, was as large in China as WeWork, which had 10,000 members in a dozen locations. Combined, WeWork expects to have a community of one million in Greater China by the end of 2021, WeWork founder and CEO Adam Neumann said in a statement announcing the deal in April.
According to the Q1 2018 Asia Pacific office trends report from CBRE, co-working operators continue to expand aggressively in China.
“Demand is focused on Shanghai, where large overseas firms and local providers are taking space in Grade A buildings as they seek to compete with traditional serviced offices. Most operators in Beijing are focusing on factory conversions, low rise properties and Grade B premises,” the report states.
A similar surge in co-office space demand was seen all over the Asia Pacific region, according to the CBRE report.