SINGAPORE: WeWork filing for bankruptcy in the US has called into question the health of the flexible office market and the future of co-working.
The company has been grappling with a number of issues, ranging from cash flow to broader questions about its business and expansion model.
WeWork’s bankruptcy disclosure, however, only relates to its North American business. WeWork Singapore has said that it is “business as usual” and that its customers can continue using its 14 offices here.
Several commentators have argued that return-to-office mandates will adversely impact the broader market for flexible office space. But co-working spaces are here to stay because hybrid working arrangements are becoming mainstream.
The world has changed since the pandemic. Whether working from the office, home, or somewhere in between, people in Singapore have options and will expect to keep them. In the ongoing war for talent, employers are using flexible work arrangements to lure jobseekers. Co-working spaces will play a key role in this hiring strategy.
JLL research and analysis predicts that by 2030, 30 per cent of global office space will be flexible in some form, whether it’s taking a flexible space from a landlord or a third-party operator, or simply increasing desk-sharing and collaboration spaces within their own premises.
Recognising that tenants require more flexibility outside of traditional lease structures, landlords have adopted flexible workspace models in Singapore. GuocoLand opened the Network Hub at Guoco Midtown in November, while Singapore Land is partnering with The Executive Centre to operate a flexible workspace in Singapore Land Tower.
CapitaLand went the joint-venture route by buying a 50 per cent stake in The Work Project. The third-party operator has expanded to 10 locations, of which seven are in CapitaLand properties.
WHY FLEXIBLE OFFICES WILL SUCCEED IN THE LONG-TERM
The flexible office market will continue to succeed for these reasons.
First, tenants with less space requirements are likely to continue seeking short-term deal structures for their real estate portfolios. As lease commitments are typically below 24 months in most flexible office agreements, tenants can meet changing space demands that inevitably come with hybrid work.
Second, tenants can reconfigure their flexible workspace depending on the size and needs of their staff at any given time.
Third, the flexible space sector provides a level of simplicity that is appealing to many corporations. A number of flexible office providers offer standard membership agreements.
Fourth, tenants can outsource community management to their flexible space provider. Operators offer services such as reception, IT support, food and beverages, event organisation and wellness programmes, which cater to a new generation of remote workers.
And perhaps most importantly, flexible office spaces can be economical and allow tenants to better manage costs like utilities and furnishings.
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FLEXIBLE OFFICES MEET THE DEMANDS OF A HYBRID WORKFORCE
In announcing office attendance mandates, employers must consider how to meet new expectations around work and where it’s done. To maintain and retain staff in Singapore, more hybrid options will be required – which is why flexible workspaces will continue to gain traction.
Recent JLL research on hybrid work arrangements found that globally, employees are now spending 3.1 average days in the office per week. In Singapore, people are currently in the office 3.4 days per week, but their preference is for 2.7 days, pointing to one of the biggest gaps in the region between reality and desire.
Add to the mix that commute times and costs are the biggest deterrent to getting people into the office full time, as per JLL analysis.
Currently the highest concentration of flexible space in Singapore is in the Central Business District, but several flexible space providers have expanded into non-CBD locations to tap into some of this demand.
For example, Regus, under the banner of the world’s largest flexible workspace provider, IWG, opened a location at Hiap Hoe Building in Balestier in 2022.
This shift has been observed in major economies like the US. Flexible offices have become more suburban, with spaces increasingly opening up in residential areas.
Companies are also betting on the longer-term appeal of flexible space. Earlier this year, JLL polled major corporations globally about their space utilisation strategies. The poll showed that 40 per cent of companies plan to increase their use of flexible workspace.
As hybrid arrangements embed themselves as mainstream working practices, in line with employee expectations in a tight labour market, flexible spaces are critical to corporations’ future real estate strategies.
While it may be easy to latch on to WeWork as a bellwether of the flexible workspace market, the truth is that this sector existed long before the pandemic. Early pioneers like IWG have operated for more than 25 years and expanded significantly throughout the early 2000s.
The market will only grow in stature with the support of employers, employees and hopefully, the next iteration of WeWork.
Andrew Tangye is Head of Office Leasing Advisory at JLL Singapore.
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