How landlords benefit from the managed coworking model
We have seen the pandemic disrupt traditional workplaces and workplace practices like never before. In a previous post, we discussed why we believe hybrid working is here to stay. A greater acceptance and demand for hybrid working has further accelerated the growth of shared workspaces around the world.
The Global Coworking Growth Study conducted in 2020 suggests that by the end of 2021, there will be 20,000 coworking spaces globally. This number is expected to double by 2024, with approximately 5 million people expected to work from these shared workspaces. The value of the coworking market is expected to grow from US$8.1 billion in 2021 to US$13 billion in 2025, at a CAGR of 12%. In Hong Kong, the labor force comprises of 3.89 million people of its population of 7.8 million. A combination of social distancing rules, increased acceptance of flexible working as part of the corporate culture, and a greater demand for flexible working from Gen Z employees who represent a greater proportion of the workforce amidst other factors means demand for coworking spaces will only continue to accelerate.
1. Repurpose traditional office spaces
The move to a hybrid workforce has prompted organizations to rethink their real-estate needs. In most instances, this has led to downsizing office space leading to higher vacancy rates. Office landlords, saddled with increasing vacant office spaces are partnering with shared workspace providers with revenue sharing management agreements. This creates a mutually beneficial relationship to both parties. Revenue sharing agreements help shared workspace providers offset some of the risks arising from variability in rental revenue from short term renters.
2. Ability for landlords to offer bespoke services to tenants
Two of the largest landlords in Hong Kong, Hong Kong Land and Swire Group, have converted some of their prime traditional business real-estate into self-operated shared workspaces. Other landlords such as the Henderson Land and V Point have also jumped on this bandwagon. Repurposing vacant office space allows landlords to capitalize on tenant’s needs for shorter leases and more flexible rental solutions. Landlord operated shared workspaces also have the opportunity to offer a sense of community by designing workspaces to allow for social interactions while balancing privacy needs.
3. Increase short-term yields
The significant rise in vacancy rates has prompted landlords to ‘think outside the box’ and offer short term, furnished solutions to clients. Offering furnished short-term workspaces allows landlords to charge approximately 15%-40% higher rents to tenants depending on location and duration. Partnering with furniture rental companies allows landlords the flexibility to offer bespoke solutions to tenants with minimal capital outlay.
4. Fostering a sense of community that may lead to longer-term leases
Shared workspace providers have a unique opportunity to design the workspaces and organize community networking events that fosters a sense of community. Tenants that feel part of a community are more likely to explore long term rental solutions. This can lead to increased and more reliable revenue streams for shared workspace operators and landlords.
5. Increase in start-up activity in HK
Results of the 2021 InvestHK survey showed that Hong Kong’s start- up scene remains vibrant, growing 68% between 2017 and 2021. Start-ups often seek flexible workspace solutions owing to budget constraints. Offering ergonomically designed shared workspaces with flexible options will allow landlords and shared workspace providers to offer solutions to this growing segment of the rental market. In the long term, as these startups mature and grow in size and revenues, shared workspace providers and landlords are well positioned to offer this segment long-term rental solutions.
How can Metro Workspace serve your organization and employee’s hybrid working needs?
At Metro Workspace, we pride ourselves in being an innovative and forward-thinking disruptor in Hong Kong’s real-estate market. We bring value to landlords, finding quality tenants and securing revenue in all market conditions. We offer flexible, affordable, and inspiring workspaces for Hong Kong’s thriving SMEs, entrepreneurs and corporates, thus offering landlords the opportunity to tap into this growing segment of the workforce.
We have created an eco-system for members to enjoy beautiful, affordable, lifestyle-centric workspaces across the city designed to inspire creativity and connection. We take pride in our network of centers, with eight locations across Hong Kong’s most popular business and creative districts, corporates in Hong Kong, Metro Workspace is positioned to meet your organization’s need for a well-equipped, ergonomic, and professional shared workspace while offering members the convenience of accessing a location near them.
Thank you for reading this blog, you may also be interested in reading ‘If hybrid working is right for you’.