More mergers and acquisitions (M&As) were in store for the co-working sector in Hong Kong amid rising demand for flexible offices, analysts said. As more firms implement a return to offices or hybrid work arrangements, flexible co-working spaces might prove to be a better option for them than traditional offices . “We have already seen a lot of activity around M&As and investment into the sector, and expect this to continue,” said Jonathan Wright, director of flexible workspace consulting at Colliers Asia. The average occupancy rate for flexible office spaces currently stands at a stabilised rate of more than 80 per cent, he said. Hong Kong is easing its strictest Covid-19 restrictions yet on April 1, but after two years of on-and-off work from home and flexible working arrangements for staff, firms in the city are expected to rethink their real estate needs in the world’s most expensive property market. And the city’s co-working operators have been busy setting the stage to benefit from this shift in strategy. Hysan Development and flexible office giant IWG , for instance, formed a joint venture for the Greater Bay Area development zone in August last year. Hong Kong-based flexible workspace provider The Executive Centre was acquired by private-equity firm KKR and Tiga Investments in June last year. “As the sector evolves, we have witnessed more corporate occupiers using flex spaces in addition to their core office footprint within traditional offices. We have also seen a couple of new operators looking to enter the market,” said Ada Fung, head of advisory and transaction services – office at CBRE Hong Kong. Earlier this month, IWG acquired the digital assets of The Instant Group, which provides virtual office solutions. This week, the flexible office firm said that it was leasing all 18 floors of Swire Properties’ newly-refurbished 8QRE in Admiralty for a new Spaces co-working centre. Spanning 64,800 sq ft, the new centre will comprise more than 900 workstations and 70 private offices. Five floors will be dedicated to enterprise suites. The current restrictions in Hong Kong and mainland China were proving to be a challenge for The Instant Group, but there were also some signs of recovery. “Across Hong Kong, The Instant Group saw demand increase by 22.5 per cent last year compared to … pre-pandemic levels, a sure sign that the demand growth we are seeing in other global markets will also become apparent in Hong Kong and Mainland China,” said Bobby Sodeiri, the firm’s director. “In major cities across China, we are already starting to see this play out this year, with enquiries via The Instant Group online platform increasing in Shanghai by 16 per cent in the first month of this year compared to last January,” he added. TheDesk said this month that it had acquired Jumpstart Business Centre, which operates serviced offices in Tsim Sha Tsui, Kwun Tong and three locations in Shanghai. M&As would be the main avenue for growth at theDesk, a company spokesman said, even as occupancy rate in its mature locations improved to 78 per cent last year from 67 per cent in 2020. The retention rate of existing members or tenants was at 86 per cent in 2020 and 2021. “Acquisitions are an important extension of our existing business community. Aside from serviced offices, it brings a number of product and service extensions, which have the capacity to be cross-promoted across the portfolio, and are in line with theDesk’s ‘beyond space’ community philosophy,” he said. After acquiring Jumpstart, theDesk now operates in 13 locations, with seven co-working spaces, five serviced offices and one space with a network partner. “There’s huge potential to bring together the strengths of each business with a view to providing additional services and opportunities to our members,” the spokesman said. One company that has opted for a flexible working space is Armor Capital, which employs 10 staff in Hong Kong and overseas. The financial services company moved to one of theDesk’ locations from an office in Wan Chai, according to the co-working operator. Armor is likely to save between 15 and 25 per cent in office rents in three years. “There is strong demand from occupiers for flexible work spaces, and therefore we believe the sector will perform well in terms of occupancy in 2022. We will see deeper partnerships between asset owners and operators to satisfy demand, and we will also see asset owners position their buildings with meaningful and integrated amenities to elevate tenant experience,” said Colliers Asia’s Wright.