co-working in singapore - cushman & wakefield/media/reports/singapore/co-working... ·...

CO-WORKING IN SINGAPORE:

CO-CREATING A SMART NATION

FEBRUARY 2016

CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION

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Prelude

Singapore’s entrepreneurship scene just

moved up one notch last year, with the Smart

Nation initiative taking shape in an

increasingly digitized world. Embarking on the

journey to build the world’s first Smart Nation,

Singapore aims to improve the lives of its

citizens through harnessing technology and

big data analytics. The objective of the

government is to encourage creative and

innovative use of technology across all

sectors, bringing about the transformation of

the innovation-intensive economy in the next

decade. The thriving start-up scene that

ensued has also revolutionized the real estate

space, and four major stakeholders are seen

to have evolved to drive the

co-working ecosystem:

Co-working Ecosystem

Operators

As start-up tenants are not in favor of

traditional leases, co-working space operators

have to innovate in order to keep up with the

changing needs of these tenants. The concept

of “co-working”, as we term it, which is similar

to the “sharing economy” business model,

is gaining popularity and has resulted

in more operators entering the

market.

Developers

Developers/landlords have been more

progressive as a key strategic partner

working with co-working operators and

start-up companies. They incubate

tenants and at the same time, create a

win-win situation for all, as there is

potential for further earnings from

boosting occupancies of existing

buildings.

Corporates

Corporates are gaining market shares

in the start-up scene as they launch

their own innovation centers or

accelerator programs. These

innovation centers evolve into

specialized “co-working space” that

only serves the needs of each

corporate as various tech and data

specialists

come together to incubate

ideas.

Government

The Singapore government strives to create

an innovation-based entrepreneurial

ecosystem that complements the Smart

Nation initiatives, enhancing the nation’s

competitiveness in the region. The

government has also sunk in

generous resources to ensure the real

estate environment is conducive for

start-ups even in the land scarce

city-state.

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CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION

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A Cushman & Wakefield Publication

Operators – Plug the Service Gap

As the city-state pursues its Smart Nation

vision, an increasing number of individuals

has emerged as independent workers,

entrepreneurs and freelancers. This group

generally prefers flexi-work arrangement,

particularly among the millennial. With the

growing need to house these workers,

Singapore’s first co-working space,

Hackerspace opened its door in 2009. In a

short span of six years, more than 36 co-

working offices can be found islandwide as of

February 2016.

Selling Points of Co-working Space

The average co-worker only uses his/her

space for less than 20 hours a week,

according to UK firm Emergent Research.

Thus, co-working operators are marketing

more than just an office table; the selling

points include the intangible qualities of

working in a creative sphere such as lease

flexibility, space for communal interactions

and invitations to networking events and

business contacts.

FLEXIBILITY

As these mobile tenants typically do not want

to be tied down by traditional leases of two to

three years, co-working operators charge a

monthly membership fee for the use of hot-

desking and shared facilities among other

things. This is achieved via tweaking the

number of membership purchases every

month. In addition, operators also cater to the

needs of the community by doing away with

rental deposits, a boon to cash-strapped

entrepreneurs. Memberships could cost as

little as S$240 for up to 40 hours per month.

This is considerably more affordable than a

short term lease at a centrally-located service

office where tenancies typically start from

S$600 per person per month.

COMMUNITY

Community is an essential part of the co-

working experience. Unlike serviced offices

where workers from different companies are

segregated into private rooms, co-working

spaces often have large open areas for hot-

desking, and devote a significant amount of

space to break-out areas for collaboration. In

general, most of these co-working spaces

apportion at least 50% of their floor space to

areas where co-workers can socialize,

collaborate and exchange ideas. The lack of

80%

of Singapore’s co-working spaces are located outside CBD

Locations of co-working

spaces in Singapore


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physical barriers helps to encourage

communication, cross-pollination of ideas and

foster creativity among workers. Today, such

work settings are highly favored by the tech

and creative industries as they allow workers

to feel less pressured in their working

environment.

NETWORKING OPPORTUNITIES

Another factor that sets co-working space

apart is the availability of networking

opportunities. Co-working members from the

same operator are encouraged to host and

join curated events as part of the community

bonding. Some operators even extend

professional services such as web designing,

accounting and legal support to start-ups. The

Hub Singapore, for instance, offers

mentorship, incubation opportunities

workshops and networking events to its 450-

member community.

Serviced Office Operators Wanting a Slice of the Pie

The provision of co-working space enables

serviced office operators to tap into a growing

and lucrative source of revenue. As many co-

workers do not utilize their space every single

day, co-working space operators are able to

sell more memberships than what the actual

maximum physical capacity allows in the

context of a traditional tenancy. This

translates into higher revenue per floor area

as compared to private serviced office rooms.

Besides providing hot-desking spaces, the

serviced office operators also incorporate

private rooms as they help to generate good

cash flow for the business until the co-working

community grows to a critical mass.

Break-out areas in JustCo’s co-working office

Co-working space at The Co

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Developers – Breaking Traditions

At first glance, this type of leases are not

attractive to landlords who prefer larger

tenants with long leases over the co-working

concept. Long-term leases not only help to

ensure that landlords get a steady stream of

the rental income that is essential for their

asset value, they are also less costly to

manage compared to short-term tenants.

Use Co-working Concept as Hedge

However, landlords could face intense

competition as Singapore enters the next

wave of office completions of approximately

3.6 million square feet (sf) of net lettable area

in 2016.

Rather than engaging in an intense price-war

on rental incentives and subsidies, the co-

working concept might just be the blue ocean

strategy for landlords to gain a competitive

advantage over peers as it could help to

attract and retain quality tenants. One

suggestion might be for landlords to consider

bundling a portion of the vacant space

together with committed space under a “co-

working concept” for quality anchor tenants.

Landlords could convert undesirable or non-

performing space to cater to the needs of

tenants, while tenants will benefit from the

extra option to rent the co-working space on

an as-need basis.

First Mover Advantage

This concept could benefit the tech industry in

particular as international tech firms in

Singapore have been on an expansion trail

since the global financial crisis in 2009. A

basket of tech firms tracked by Cushman &

Wakefield shows that their space

requirements have increased by over 50%

annually on average since they first set up

permanent offices here. However, rigid terms

in their existing lease terms are stopping them

from instantaneously rescale their space

requirements. Thus, the co-working concept

presents itself as an ideal option for

businesses to scale up or down depending on

their performance without incurring hefty

upfront rental costs.

Indeed, some developers have already

tapped into the potential of this niche market

as they see it as the way forward. An example

is WorkSpace at Keppel Tower where the

landlord, Keppel Land, offers flexible office

arrangements to tenants so as to increase the

diversity of their tenant base, and at the same

time, boost the occupancies in the existing

buildings.

Hot-desking and

break-out areas at The Co “Rather than engaging in an intense price-war on rental incentives and

subsidies, the co-working concept might be the blue ocean strategy for landlords

to gain a competitive advantage over peers as it could help to attract and

retain quality tenants.”


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Workspace at Keppel

Corporates – the Bigger Picture

While Singapore’s start-up scene has a long

way to go before it can rival the scale seen in

other global cities, many corporates are

beginning to recognize the importance of

innovation and creativity. In line with

Singapore’s Smart Nation plan and with the

support of the Singapore government and

partners, various corporations have launched

incubators to bring in technology and

analytical data professionals and form their

own specialized teams.

Innovation Labs Germinating from Corporations

The banking sector saw HSBC launching a

Fintech innovation lab in Singapore with the

help and support from the Monetary Authority

of Singapore (MAS). Its innovation lab helps

to support the development and testing of the

digital and mobile banking services. In the

insurance sector, Metlife launched a 7,800 sf

innovation center called LumenLab to disrupt

new business models in the areas of

wellness, wealth and retirement. Others which

have joined the bandwagon to grow their

resident innovation labs include DBS Bank,

Accenture and Dell.

Some corporates help to drive innovation via

accelerators. These fixed-term, mentorship-

driven programs attract start-ups with the

hope of obtaining venture capital at a later

stage. Accelerators aspire to disrupt sectors

which have remained relatively unscathed by

the tech revolution. A prime example is Pi

Labs, which aims to drive tech innovation in

real estate. With Cushman & Wakefield as a

strategic partner, Pi Labs is able to empower

entrepreneurs with ready access to data and

mentorship from experienced real estate

professionals, enabling them to accurately

gauge the pulse of the market and fine-tune

their products.

Moving forward, we expect an increasing

number of corporations to make a concerted

effort to start or expand their own innovation

labs. Accelerator programs could also be

initiated where corporates have a vested

interest in the start-ups. This trend will help to

grow the demand for real estate space, a

boon for developers and landlords.

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Pi Labs in London

CORPORATE-DRIVEN INCUBATORS IN SINGAPORE

“The convergence of property and technology will transform the way we and our clients

operate in the future. As a leading property adviser, Cushman & Wakefield is committed

to property and software businesses who will shape the future of our cities and buildings

and the way we work, shop and live.”

- Digby Flower

Chairman, UK & Ireland - Cushman & Wakefield

Corporation Industry Innovation Center Objective

Tech Internet of Things

(IoT) Lab

Develop & test Dell and Intel solutions, allow

for scalability testing

Banking &

Finance Life Analytics Lab

Process data from social media platforms to

generate new digital innovations and sales

leads

Insurance LumenLab

Develop disruptive new business models in

areas such as wellness, wealth and

retirement

Banking &

Finance

HSBC Singapore

Innovation Lab

Support development and testing of digital

and mobile banking innovation

Management

Consulting

Services

Accenture Analytics

Innovation Center

Develop new approaches for use of

analytics in key areas of services such as

public safety, service delivery, workforce

effectiveness etc.


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Government – Growing with Home-grown Start-up

The global start-up ecosystem ranking 2015 by Compass

Twenty years ago, most would only associate

budding start-ups with Silicon Valley due to its

proximity to the top tertiary institutions and

tech cluster. Today, start-up ecosystems

similar to that of Silicon Valley is rapidly

replicating itself around the world. In the 2015

Start-up Ecosystem Ranking conducted by

Compass, Singapore clinched the top spot in

Asia Pacific for its strong start-up ecosystem.

Its business-friendly environment is currently

a fertile ground for start-ups, with 2,400 -

3,600 tech start-ups calling it their homes.

Singapore’s start-up ecosystem ranks highest in Asia-Pacific

Singapore has established itself as one of the

leading innovation-driven economies as the

level of entrepreneurship has risen

considerably over the last decade. According

to the Global Entrepreneurship Monitor 2014

Singapore Report, its total early-stage

entrepreneurial activity (TEA) rate has

consistently ranged between 10% - 12% for

the past three years, in comparison to a TEA

rate of about 5% in 2006.

Singapore’s Total Early-Stage Entrepreneurial Activity Rate

2006 5% 2014 10-12%

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Government Playing a Pivotal Role in Singapore’s Start-up Ecosystem

The Singapore government has been heavily

involved in the start-up ecosystem to push for

more innovation with the establishment of JTC

Launchpad @ one-north, also known as Block

71, the co-working enclave for start-ups and

incubators. Affordable rents, along with an

established vibrant community of start-ups

and the ease of access to important support

services and networking opportunities has led

to it being the favored choice for budding

entrepreneurs in the tech and media sectors.

Its current capacity of approximately 430,000

sf now houses some 40 incubators and 600

start-ups as of Jan 2016 and it aims to grow

its capacity to house 750 start-ups by 2017.

Besides providing space for incubators,

government financing such as the early stage

venture funding (ESVF) scheme is available

to local tech start-ups. More recently in

September 2015, it was announced that the

Singapore government would invest S$40

million through the ESVF scheme to

encourage large local enterprises to support

early stage Singapore tech companies in

building up specific technology ecosystem

which is crucial to Singapore in the shift to an

innovation-driven economy.

“Our clients of co-working spaces and

serviced offices in Singapore are keen to work

with us in other markets, such as our next

destination Shanghai. We aim to be the leader

of serviced office and co-working space

provider in Singapore and Asia-Pacific in the

coming years.”

- Kong Wan Sing

Founder & CEO of JustCo

Conclusion

Plenty of Room to Grow

The new wave of co-working offices catering

to other niche crowds has provided further

room for private co-working operators to grow

in the foreseeable future. A maturing

ecosystem allows new entrepreneurs to find

the required training, help, funding, and they

in turn help their peers and the next

generation entrepreneurs, who continue the

cycle forward. Singapore is seen to be

consciously creating this ecosystem in order

to take the economy to the next phase

forward, which could lead to itself drawing in

more talents, mentors, funding, and eventually

Source: JTC

JTC Launchpad

Future Capacity by 2017

Current Capacity 600 Start-ups

750 Start-ups


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setting off a virtuous cycle to create not only a

business ecosystem, but also to help the

whole ecosystem to flourish beyond its

shores.

More players from overseas are also looking

to enter the Singapore market. Possible

entrants in the horizon may include American

co-working giant WeWork, Spaces by

serviced office operator Regus, and the Hive,

a co-working operator which has already

established three locations in Hong Kong. At

the same time, local co-working operators

have expressed their intentions of extending

their reach across the Asia Pacific.

These new entrants, however, will need to

play catch-up as the established players have

had a significant lead time in the build-up of

their communities. Nevertheless, their

presence will be a boon to the co-working

ecosystems here. Local co-working operators

could learn from the success stories and

employ tried-and-tested strategies by global

co-working players such as WeWork. Some

innovative strategies they could implement

include negotiating with the landlords for

longer rent-free periods, substantial fit-out

subsidies in exchange for signing longer

leases and generating additional revenue

from selling healthcare and other business

support services.

As co-working space in Singapore evolves

into the next phase of maturity, consumers

are on the winning end as they will benefit

from the wider range of concepts and greater

product differentiation over time.

©2016 Cushman & Wakefield.

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SUBSEQUENTLY CORRECT IT IN THE EVENT OF ERRORS.

Christine Li Director, Research

+65 6232 0815

[email protected]

Goh Jia Ling Manager, Research

+65 6332 0885

[email protected]

Nicholas Chia Analyst, Research

+65 6332 0816

[email protected]

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