Flexible workspaces create new demand for office spaces not only globally, but also in China and Hong Kong

Rising office costs and slowing business expansion in mainland China and Hong Kong have prompted a growing number of start-ups to prefer flexible office spaces rather than traditional offices.

Like many of his peers, Wen Hong, co-founder of Shenzhen-based drone maker Eulerspace, rented an office in Beijing when his firm started operations in April 2014. But the rising office costs in the Chinese capital and the constantly changing business strategy of the young company soon forced Wen to look at other alternatives like sharing workspaces with other firms.

Flexible workspaces are traditional office spaces that are shared by more than one company and the costs are divided among the tenants.

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At present, Eulerspace operates from two flexible workspaces and one traditional office space. Its marketing and software development operations are carried out in the flexible workspaces in Beijing. At its headquarters in Shenzhen, most of the work was still conducted out of a traditional office, said Wen, adding that it also had a start-up venture that rented flexible workspaces to explore new business opportunities in Shenzhen.

“Since we do not have a big team in Beijing, we do not want to pay huge amounts as rent,” said Wen, adding that the company decided to opt for flexible workspaces.

Flexible working spaces are now one of the fastest-growing segments of the property market in mainland China, Asia and Hong Kong , according to leading property consultants.

Demand for flexible office spaces is set to rise 63 per cent this year globally to 12,700 units from 7,800, according to property consultant Colliers International, with much of that growth coming from Asia.

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In mainland China, the rapid growth of the technology sector had increased demand for serviced offices and flexible workspaces, Colliers said.

Beijing, which hosts most of the start-ups in the country, had been one of the main markets for flexible office spaces, it said, with facilities like Soho 3Q, URwork and People Squared leading the way.

“The demand for flexible workspaces is robust in China, especially in Beijing – a hub for innovation,” said Zac Tang, assistant analyst for research and advisory services, Asia, at Colliers.

Though mainland China had established local firms offering flexible working spaces, it had also attracted international firms like WeWork, which had leased out more space in Shanghai than in Hong Kong, said Tang.

The trend is fast catching on in Hong Kong.

“Chinese companies accounted for most of the office demand in Hong Kong last year, particularly in the core business districts,” said Andrew Haskins, executive director of research and advisory services for Asia at Colliers.

Colliers expects flexible working operators will take up 20 per cent more office spaces in the city this year than those additional spaces occupied by Chinese firms last year.

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WeWork has been the main force behind the most eye-catching expansion deals by flexible working operators in Hong Kong. This year, the company secured 150,000 sq ft of office space in the city, including 90,000 sq ft in a brand new grade A building at 535 Jaffe Road in Causeway Bay.

Jonathan Wright, associate director of office services for Hong Kong at Colliers, said start-ups had fuelled most of the growth. Several multinational companies are also taking up such spaces as they do not want to commit to the three- to six-year contracts for leasing traditional offices.

The changing demand in the office sector had wide implications for all property market participants, said industry experts.

“Landlords must build relations with a new class of tenants, while owners of flexible workspaces must devise the right strategies for expansion into other urban markets,” said Haskins, adding that it was important for developers to incorporate new features into building designs.

This article has been amended to say that Colliers expects flexible working operators will take up 20 per cent more office spaces in the city this year than those additional spaces occupied by Chinese firms last year, rather than Chinese firms being expected to take up 20 per cent more flexible office spaces this year, and to fix typographical errors