Compass points to new direction
Signs of a shake-up in the serviced office sector are emerging with the takeover of a business centre by a relatively new player.
Compass Offices, set up a year ago by two former corporate headhunters, has bought Cosmopolitan Business Centre in Causeway Bay. The acquisition, signed late last week, takes Compass' presence in Hong Kong to about 187,000 sqft across 12 office buildings.
When Compass was set up in December 2009 by Andrew Chung and Lachlan Sloan, it had premises totalling 10,000 sqft. Now, the company boasts more than 220,000 sqft, including locations in Tokyo and Singapore.
The rapid expansion has ruffled a few feathers among local business centres, with Compass' strategy blamed for lower asking rents. Some operators say leverage has enabled Compass to negotiate longer leases and larger premises, notably in Central.
'The industry needed a shake-up,' says Chung, Compass chairman and CEO. 'More supply has certainly meant lower occupancy costs for the whole business community. As traditional rents have risen sharply since 2009, serviced offices' costs have dropped, making it hard for other operators to break even if they signed their leases at the peak of the market. Certain centres are closing down.'
The takeover of Cosmopolitan's 7,000 sqft location on the 28th floor of Soundwill Plaza in Russell Street shifts the focus of competition from the finance hub of Central to Causeway Bay, where more mid-tier businesses operate. Regus, Compass' nearest rival in terms of space occupied in Hong Kong, will officially open a new location in Times Square next month.
Older buildings in Causeway Bay are also being targeted by developers under urban renewal programmes, with independent business owners fearing rents will soar. However, Chung says Compass will continue to serve smaller companies seeking a good location.
Chung and his team were impressed by how Cosmopolitan's owners gave priority to ensuring long-standing clients would be served well after the change of management.
'The honest and transparent approach rather than the price was the only factor when choosing a buyer,' Chung says.
'Our newly acquired clients are long-term users of serviced offices and many have used larger global firms before, experiencing hidden costs, and therefore understand that transparency and flexibility are important. This exactly mirrors the business philosophy of Compass Offices. The value-added services are also important so that clients can focus on their business.'
While Compass has its detractors, Chung says a 'new direction' is being set that raises standards in IT provision, customer service and luxury offices at affordable prices, though this will mean some operators going to the wall.
'Smaller providers cannot compete in service as we have the economies of scale to recruit more experienced staff,' he says. 'We can attract the best as we offer career growth, regional opportunities and more responsibility of managing more centres.'
With Compass due to open another location at Admiralty Centre Tower I in August, expansion on the mainland and stock market flotation may follow.
