Hong Kong demand for co-sharing office space rises in line with growth of start-ups
Hong Kong has seen a rising demand for co-working office spaces amid the rapid growth of start-ups in the city.
The new demand is unlikely to threaten landlords of Grade A office space in the Central Business District, but it will help landlords of lower-tier office properties widen their tenant base to fill up offices.
“Co-sharing is a big game-changer in the traditional real estate markets,” said Brian Brenner, head of tenant representation with JLL Hong Kong’s markets team.
JLL sees the trend in the local market as an opportunity for property owners. As an example, WeWork, a global co-working space provider with 90 locations in 28 cities, has leased a flagship location comprising 93,000 square feet over nine floors of Tower 535, Causeway Bay’s newest office development on Jaffe Road. It provides amenities for more than 1,300 users, according to JLL, which arranged the leasing deal.
Founded in 2010, New York-based WeWork was valued at US$16 billion in March. It provides flexible work spaces and common areas that encourage social interaction in leased office premises. WeWork then rents these to start-ups and freelancers.
“This is a trend,” said Thomas Lam, head of valuation and consultancy at Knight Frank, adding that the high cost of office rentals in Hong Kong has forced small companies and start-ups to share office space.
The average Grade A office rent in Central was flat at HK$105.6 per square foot as of the end of April, according to JLL.
Knight Frank expects office rents on Hong Kong Island to increase by 5 per cent this year given the tight availability and extremely low vacancy rate. Meanwhile, office rents in decentralised areas will fall by 5 per cent given the abundant supply in the pipeline.
“I do not think [co-sharing] will hit the Grade A office space in core areas, which now are mainly occupied by financial institutions, multinational companies and professional firms,” said Lam of Knight Frank.
“But I believe some owners of Grade B or Grade C office properties in non-core areas would like to consider renovating or upgrading their assets to co-sharing offices in order maximise return,” he said.