Hong Kong’s co-working sector is on the move again, as the city’s fifth wave of the coronavirus continues to subside, with expansion and consolidation taking place simultaneously. The Great Room, an operator with more than 24,000 sq ft at one centre at One Taikoo Place, for example, is in discussions for four more such facilities. “Covid-19 is a catalyst … [for] growth because companies are realising that the agility [of flex spaces] is the counter to the uncertainty due to pandemics, volatility in business environments and shorter business cycles,” said Jaelle Ang, CEO and co-founder of The Great Room. “Very soon, we will not call it ‘co-working’ any more. It will just be ‘working’ – as this will be how people work.” The current trends of expansion and consolidation come as flexible workspaces still account for a small portion of commercial property in the city. Flexible workspaces represent a very small percentage of the total commercial space in Hong Kong, at less than 5 per cent, Ang said. But the numbers are growing. According to CBRE data, as of the first quarter of this year, Hong Kong’s co-working market accounted for 2.76 million sq ft, a year-on-year increase of 5.7 per cent. Co-working operators were spread across 350 locations, up 11 per cent year on year, but were charging HK$2,400 (US$306) per desk a month on average, which represented a decline of 18.6 per cent. The city remained a priority market for The Great Room’ Asia-Pacific expansion plans, because of increasing demand from multinationals, Ang said. “We have taken a cautious approach the past two years, but we would like to expand our team, the number of locations and make a greater investment in Hong Kong,” she said. “The timing is ideal as Hong Kong slowly opens up and hopefully business travel and new business will not be far away.” “We have a few deals under discussions and there is a strong focus on opening in Central in 2022,” Ang said. The Great Room aims to double its Asia-Pacific portfolio in the next two years. “We would like to grow our footprint even faster in key cities such as Hong Kong, where decision makers and regional headquarters are.” Local developer Chinachem Group has partnered with The Hive and held the soft opening of The Hive Central X CCG Commons co-working space last month. The 17,000 sq ft workspace spans four floors in Chinachem Tower in Central and hot desks at the facility start from HK$3,000 per person a month. “Currently, three new centres [are] due to open by year-end 2022, totalling [about] 71,000 sq ft and 23,700 sq ft on average,” said Sam Gourlay, head of tenant representation at the office leasing advisory department at JLL in Hong Kong. As Hong Kong eases Covid-19 curbs, co-working firms hunt for more acquisitions With demand for flexible spaces continuing to rise in the post-pandemic era amid a greater emphasis on lease flexibility and workplace design, and with landlords increasingly seeing the benefits of including a flexible space in their buildings, JLL said it expected to see a greater number of operators vying to enter the Hong Kong market. “When the pandemic first hit, it hit the flex workplace industry hard, much like the rest of commercial real estate,” said Jamie Hodari, CEO and co-founder of US flex workspace operator Industrious. “However, in late 2020, and especially in 2021, as vaccines started to be distributed more widely, there was a transformation.” Companies around the world are trying to give employees more choice of when to work and how, which requires a flex operator to effectuate, Hodari said. “As a result, flex operators in Asia, the US and Europe have all had banner years and are growing quite rapidly,” he said. “The workplace strategies that are driving increased demand for flex are going to be with us for a very long time, so I would look for continued growth in the flex industry for quite some time.” Meanwhile, mergers and acquisitions (M&A) have become a major theme in the global flexible office market. For example, Industrious, one of the largest flexible workplace companies in the US, last week acquired The Great Room and Welkin & Meraki , two flexible workplace providers in Asia and Europe, respectively. The deals altogether were valued at more than US$100 million. CBRE said last year it had acquired a 40 per cent stake in Industrious, which makes CBRE its largest shareholder. This comes as more global companies increasingly prefer to work with one or two providers globally. This exerts pressure on local and regional operators, since they cannot compete for this business. What is the future of co-working spaces in Hong Kong? “Like many B2B businesses, they eventually end up running most effectively as global platforms, so there’s been lots of consolidation where local or regional providers join one of the global platforms,” said Industrious’s Hodari. “Sometimes M&A waves in industries can be very painful and disruptive, but I think this consolidation into multimarket platforms has been very healthy for everyone involved.”