Concrete Analysis | Multinational firms fall in love with the flexibility offered by co-working spaces

Co-working operators may have initially imagined their clientele to consist of start-ups and small businesses. No one foresaw this would revolutionise real estate, and awaken a vast occupier base – multinational corporations.

More than 40 per cent of co-working spaces are now occupied by MNC’s, doubling in the last two years. No surprise they are now the number one target for flexible workspace providers. The evolution of this sector is happening at such a rate that the design of committed space is changing before new sites come to market to cater for the change in clientele. A very traditional asset class, real estate has had to adjust rapidly to keep pace with changes in its customers’ preferences.

Uncertainty stemming from the US-China trade war, Brexit and China’s slowing economy along with revolutionary technology, disruption and new ways of working have all made it more difficult for MNC’s to accurately forecast their business in six to nine years.

Hong Kong is experiencing high rents and vacancy remains tight. It’s perhaps unsurprising that tenants reaching the end of their current leases are loathe to renew at current market prices for more than three years.

Based on our forecasts, this may be a solid strategy: the market is expected to be more favourable to tenants by 2022 and new supply in Central, Hong Kong East, Wong Chuk Hang and Kowloon East will have come online by then, giving end-users more office options, while further citywide infrastructure improvements will make decentralised districts even more accessible.

The catch for MNCs will come if they need to expand or adjust the size or scale of their businesses over the next few years, and this is where flexible space offers solutions. Flex-space often comes with short-term contracts and costs and enables firms to reduce capital expenditure, leaving more money to invest in other areas of a firm’s business.