COLLIERS INSIGHTS OCCUPIER SERVICES | APAC | JULY 2020

THE FLEXIBLE WORKSPACE

OUTLOOK REPORT 2020
APAC
 INTRODUCTION

In January, we predicted five flexible workspace trends to

THE WORK PROJECT | HONG KONG
watch. These included enterprise outsourcing becoming
mainstream; highly amenitised assets with best-in-
class hospitality being ‘table stakes’ for any new office
development; a continued boom in wellness offerings;
a revival of suburban locations and further operator
fragmentation. The impact of COVID-19 has accelerated
these trends, while new trends – such as the integration
of home as a place of work and the growing importance of
the digital experience – have also emerged.

In this report, we explore occupier strategies to guide our

enterprise clients as they adapt to the new reality. We
also look at the models in which asset owners can deliver
flexible workspace and what impact they have on valuation,
together with our view on fragmentation and community in
a post COVID-19 world.

Finally, we provide a look back at 2019 in our market-by-

market snapshots with a data-driven summary of key cities,
supplemented by an anecdotal review of 2019 and 2020
outlook from our in-house experts.

JONATHAN WRIGHT
Director | Flexible Workspace Consulting I Asia
 OCCUPIER STRATEGIES

Ultimately, flexible workspace, in any

SPEED, SHARED
capacity, is the outsourcing of real
HOURLY / DAILY
estate to an operator, whether that
Meeting Space operator is the owner of the asset or a
third-party flexible workspace operator.
> On-demand meetings
While this is typical for start-ups and
How occupiers > Off sites / project planning SMEs, we expect current global market
> Conference / event booking conditions to lead to a large-scale
can leverage the upswing in enterprise outsourcing.
flexible workspace
In our recent survey, which reached
sector as part of over 4,000 occupiers, over 50%
considered a flexible workspace solution
their Corporate Real to accommodate a longer-term office,
Estate (CRE) strategy DAILY / MONTHLY which would be considered a core space
with stable headcount projections, while
Traditional Coworking almost half of respondents expected
> Open plan working environment a minimum of 10% of their portfolio to
There are a number of be flexible within three years. Further
> Dedicated or hot desks
component parts to flexible cementing this shift, IWG, the world’s
workspace and, when > Shared facilities
largest flexible workspace operator,
considering a corporate real confirmed that it has seen a 35%
estate strategy, occupiers SPACES | SEOUL increase in demand for 50+ desks from
should consider which Q1 2019 to Q1 2020.
components are best suited
to their business needs and
the level to which they require
MONTHLY / ANNUAL
each component.
Private Offices/Suites
ONE YEAR FROM NOW AND BEYOND, WHAT IS THE MOST SIGNIFICANT CHANGE
> Private office or suite
THAT YOU ENVISION TO COMMON TRANSACTION STRUCTURES?
> Limited customisation
> Shared facilities
More flexibility built into traditional leases,
44.5%
without material change to length of lease term

More “flexible workspace” agreements

26.6%
(coworking, services offices, etc.)

Shorter term for traditional leases 19.8%

ANNUAL+
CUSTOMISED, PRIVATE

A change not listed here 3.7%

Enterprise Solutions
> Dedicated floors/offices
More leasing vs. owning 3.0%
> Ability to customise
> Branding opportunities
No material change 2.4%

Source: Survey from Colliers Occupier Services Webinar

4 | | 5
 WHAT ARE THE KEY DRIVERS FOR OUTSOURCING
The increased variety of products TO FLEXIBLE WORKSPACE
provided by flexible workspace operators
has unlocked the ability for enterprises
to actively manage their office space
commitments. The traditional route of AGILITY
delivering office space is hampered by When an organisation has unpredictable or dynamic
lead times in signing a lease, lengthy headcount changes, flexible workspace can allow for agility
procurement processes for build outs to grow or contract.
and the need for capital which could be
better used elsewhere. Working with a
flexible workspace operator can enable
CRE leads to manage their portfolio on an
FINANCIAL
Outsourcing workspace delivery can reduce capital expenditure
on-demand basis, easing friction.
and provide operational expense certainty. Reducing long term
Todd Liipfert commitments reduces balance sheet liability and can improve
Senior Development Director | The Executive Centre the efficiency of capital.

OPERATIONAL
Outsourcing the delivery of office space can create operational
efficiencies. A single supplier is responsible for all workspace
operations, this can deliver in house management and
administrative efficiencies.

TRANSFORMATIONAL
THE EXECUTIVE CENTRE | HONG KONG Business-driven decisions, expansion into new territories
and M&A integrations can all be triggers to use
outsourced workspace.

WORKSPACE OUTSOURCING
Outsourcing means an operator delivers all of the elements of the office acquisition
URGENCY
Flexible workspace is usually available on much shorter lead
and reduces administrative and operational burden of multi-supplier self delivery. times, existing locations can be occupied immediately and new
sites can, at times, be delivered quicker than self delivery due
to procurement and supply chain efficiencies.

All inclusive costs

LEASEHOLD /
Rent
Connectivity
EMPLOYEE ENGAGEMENT
Connectivity OUTSOURCED Operators of flexible workspace typically offer a range of
SELF DELIVERY Pantry
Pantry amenities, facilities and services which may be hard to self deliver.
All other costs This can improve the workplace environment for employees.

| 7
 OCCUPIER MODELS
The component parts of flexible
workspace can be deployed across
a range of solutions. Here we break
down these solutions, though for
most occupiers we would expect a
range of these solutions to apply.
JUSTCO | SEOUL
8 |
MANAGED OFFICE
Scenario
> An occupier has a requirement to move a
team, division or whole city office, typically
40–300 people.
> The occupier understands the full range
of benefits traditional flexible workspace
offers but doesn’t wish to share all
facilities (e.g. pantry and meeting rooms)
and wants more ownership and privacy.
Opportunity
> A flexible workspace operator delivers
a fully outsourced workspace, which
includes all elements of launching and
operating an office.
> The new facility is a customised and
private environment that looks and feels
like the occupier’s “own” space, delivered
and managed by a third party.
> Occupiers have the ability to increase the
flexibility of their portfolio through shorter
commitments, mitigate capital expenditure
and reduce balance sheet liability.
Considerations
> This type of solution is now being
delivered by specialist operators, traditional
flexible workspace operators and, in some
cases, directly by asset owners.
> Occupiers should be mindful of who is
best placed to deliver and operate these
environments, especially in new locations.
> Managed space is a grey area that bridges
the gap between a lease and traditional
flexible workspace, arguably allowing the
occupier to have the best of both worlds.
| 9
 FLEX & CORE REVERSE FLEX
Scenario Scenario
> An occupier has a requirement for > An occupier has under utilised
new premises with fluctuating and/or leasehold space.
unpredictable headcount projections. > Traditional sub-letting or assignment
> Alternatively, an occupier wishes to strategies may not be possible due to
outsource some component parts of their market conditions.
real estate, such as meeting space or a > The occupier may want to reoccupy space
project team. in the future.

Opportunity Opportunity
> Identify an operator that will partner to > Reduce property costs by partnering with
enter an asset. a flexible workspace operator to repurpose
> Route 1 – The occupier commits to less space into flexible workspace.
space for their core requirement and the > Mitigate property expenses and even
operator (or asset owner) launches a generate income.
flexible workspace location in the same
> Operators can use different structures,
building.
including; assignment, sublease and
> Route 2 – Full operator commitment – management agreements.
the occupier commits to “anchor” the
new location and provides options for
future expansion.
Considerations
Considerations > Asset owner consent may be required.
> There may be capex required to
reconfigure.
> The occupier has the benefit of long-term
security for core operations and flexibility
for growth.
> Predetermined expansion options within
the flexible workspace demise (this can
be whole floors) provide future growth
security.
> The occupier has access to amenity
spaces such as meeting, conferencing and
events spaces, reducing core commitment
and elevating the level of amenities.
> Buy in from the asset owner is needed to
effectively execute.

10 | | 11
 HUB & SPOKE
Scenario
> An occupier wants to reduce the reliance
on a single headquarter building and
implement a dispersed occupancy strategy.
Opportunity
> Reduce real estate costs by shrinking HQ
location and taking smaller hubs across
a city, region or country. Typically, these
would be in lower cost locations.
> Access talent and reduced labour costs in
alternative geographical locations.
> Improve work/life balance of employees,
reducing commuting times, increased
quality of life and reduced living expenses.
> Maintain central flagship HQ, but reduce
the amount of space.
Considerations
> Ensuring the consistency of workspace
quality across a distributed office portfolio.
> Operational and management
considerations of a high number of
locations.
> Outsourcing the delivery of these locations
can reduce operational burden, improve
workspace environment and lower
lease liability.
12 |
DIGITAL CAMPUS
Scenario
> An occupier has teams or individuals
who work remotely or travel frequently.
For example, employees who work from
clients’ offices, on the road, from home
or even cafes.  
Opportunity
> Membership to a network of drop-in
spaces across a region.
> Access to professional workspaces can
improve efficiency and productivity for
remote workforce.
> Ability to reduce physical office portfolio.
> Reduced fixed property expenses;
memberships are highly flexible.
Considerations
> Employees need to have technology that
enables them to work remotely.
> There are a variety of local and regional
platforms in the market. However, Colliers
has aggregated a range of operators to
deliver the Colliers Mobility Pass, the only
global platform. Learn more here.
| 13

CONSIDERATIONS
FOR ASSET OWNERS
The impact the type of operator agreement has on asset valuation.
The topic of flexible workspace valuation has been
of interest to investors, asset owners, operators
and debt providers alike, as the effects of COVID-19
have amplified the need for a clear and consistent
approach to valuation, as the sector comes under
scrutiny. Currently, there is a lack of hard data, a
lack of evidence, and a lack of certainty regarding
what form of agreement would best fit assets and
operators, as well as drive value.
In late 2019, the RICS produced a paper entitled
“Valuation of flexible workspace,” which most in the
sector assumed would signpost the methodology
and create a standard for the sector. While there
is no formal methodology detailed by the RICS,
the paper warned of the pitfalls of valuations and
advised caution to those without any experience
in the sector.
The ‘art’ of valuation is to seek to replicate the
market and reflect the approach a potential investor
would adopt when formulating their offer for an
14 |
STOREY | LONDON
asset. Therefore, valuation in this sector should be
no different; just as an investor would not look at
an asset making strong returns and offer based on
the vacant possession value, neither should real
estate professionals.
The most common questions we receive from our
investor clients relate to the types of agreements
in the market and how they impact their valuations,
particularly when seeking debt. No conversation
on the topic of agreements between asset owner
and operator is ever the same. It is true that flexible
workspace assets are generally operated using
one of four delivery models, but outside of a lease
it’s rare that we see the exact same deal structure
more than once.
We have found that the ‘science’ of valuation is
to reach a consensus between the investors,
operators and debt providers in any deal. This is
the case in each of the four main bases of value.
THE VANILLA LEASE
The covenant and surety offered by the tenant
(operator) is the main factor that will impact
valuation. There is generally evidence available;
however, we would also factor in the variable
nature of that tenant’s base of income, i.e.
its members and what the strength of their
covenant might be.
The three remaining bases should be assessed on
the trading potential of the asset.
OWNER OPERATED
The EBITDA of a well-run asset can be comfortably
above 200% of the Market Rent of the asset on a
vanilla lease basis. While there is limited evidence
in the market, in early 2020 the sentiment was that
there would be a high volume of M&A activity. HYBRID LEASE
Assets that are owner operated could These agreements are becoming more popular.
fundamentally be sold to an alternative operator They generally involve a certain level of base rent
as a going concern, or to an investor with a
view to either self-delivery (which is rare) or
(lets’ assume 50% of the Market Rent), with a
percentage of turnover/EBITDA element on top.
inserting the same or an alternative operator on a They are considered to provide security to the
management agreement. freeholder on the basis that half of the Market Rent
is guaranteed.
The Market Rent element of EBITDA is generally
‘safe’ for a good quality asset that has reached This creates another layer to the top-slice method
operational maturity. It is the sustainability and and, again, the yields adopted should reflect the
future growth potential of the top slice element historic trading levels or the trading potential of the
(the EBITDA over and above the Market Rent) asset. A good understanding of how these assets
that dictates the yield that should be applied operate is key to determining the appropriate yields,
to this element. as well as the quality of the asset itself.
STOREY | LONDON
We launched Storey – our flex offering – to keep
close to our customers, serve a wider proportion
of the market, build capability and capture an
income premium. Embedding Storey into our
campuses has allowed us to diversify the customer
mix (e.g. attract fast growing scale ups) and
expand our relationship with existing customers by
unlocking the ability to deliver flex & core.
James Lowery
Head of Storey | British Land

MANAGEMENT AGREEMENTS
These operational agreements offer the
least security of income to the freeholder;
however, they also offer the greatest
potential returns of the non-self-delivered
options. Again, valuing these agreements
has to be done with regard to the
sustainability of the income.
The main issue from a valuation
perspective is the real lack of evidence in
the market. Where deals have taken place,
there has been limited visibility over the
actual trading figures, and therefore the
returns for the investor.
There is an argument that suggests,
from an operational perspective, that
management agreements are in fact
favourable to a vanilla lease given that
some flexible workspace operators have
a history of terminating leases prior to
natural expiry where the market has
moved. This leaves an operational gap
that would be less likely to happen under
a management agreement.
Finally, some investors see value in
having asset management opportunities
from having a management agreement
rather than a lease.
INDUSTRIOUS | NEW YORK
VALUATION ISSUES
There is an element of uncertainty regarding
valuation during the period prior to the maturity of
the operation for assets on both a Hybrid Lease
and Management Agreement. We have found that
the concern of many investors is that over this
period any valuation for debt purposes will not
truly reflect the future potential of the agreement.
In the hospitality sector, the Fair Maintainable
Trading (FMT) level is typically adopted. Only
with a detailed understanding of the operator’s
projections and what a FMT can reasonably look
like for that particular asset and location can one
reflect the attributes of the agreement in place.
This is an agreement that could result in strong
returns for the investor, and therefore must be
more valuable to an asset owner than having
vacant possession.
Another issue surrounds the capex contribution.
The investment has to be reflected in the valuation;
however, this makes it even more important
to demonstrate the future benefit to the asset
owner. This can only be the case if the build-
out is transferrable and another operator could
trade successfully from the premises. Without the
ability to assess the trading potential, the impact
of the capex on the valuation would make these
agreements unviable unless the assets reach
maturity on day one, which is unrealistic.
Management agreements place the
operator on the same side of the table
as the asset owner. This enables us
to unlock a greater range solutions for
occupiers and a more holistic approach
to optimising asset values for the asset
owner. It’s why Industrious hasn’t
signed a lease since 2017.
Jamie Hodari
CEO | Industrious
When a hybrid lease or management agreement is
in place, an investor is unlikely to view this as held
with vacant possession, so why should a valuer?
At the same time, an investor is not going to
assume that these agreements alone are going to
be more valuable (without proof of trading levels)
than a vanilla lease. Where the flexible workspace
element of an asset is only one part of a multi-
let asset, an investor may well see the additional
benefits to the rest of the building – this benefit
is likely to materialise through a shortening of
assumed letting/re-letting periods as well as tenant
retention. While any valuer would not be able to
quantify this benefit, it provides further weight to
the argument that a more positive approach (rather
than Vacant Possession) should be adopted.
This again is where the valuer must reflect the
approach of an investor. It is then the duty of the
valuer to demonstrate this to the debt provider in
their report, thereby completing the triangle.
The challenge presented to valuers by the
emergence of such a diverse range of deal
structures and assets is still significant; however,
having an understanding of how mature flexible
workspace assets operate and generate income
is vital to analysing them as an investment. The
Colliers Flex Office Rating System enables us
to plot the underlying asset quality and helps
determine the potential sustainability of the
existing or projected cash flows. While there is
limited direct evidence available in the market, it
is then up to the valuer to utilise their experience
to ensure their adopted approach is one that
would be reflected by a purchaser in the market,
and considers the risk and returns that are
achievable. This is a fundamental principle that is
frequently forgotten.
| 17
 The distinct variations from country to country in
COMMUNITY IN A
their government responses, social behaviours,
economic performance and extent of their health
POST COVID-19 WORLD
crisis has allowed local operators with a specialised
knowledge of their market to tailor solutions to their
customers. The ‘flight to quality’ often seen in a
downturn has also become a ‘flight to safety’.
The various levels of lockdown around the world have restricted access
Brad Krauskopf to the office and have consequently limited social interaction. Social
CEO & Founder | Hub Australia relationships are a major contributor to employee well-being. Prior to
COVID-19, most employees’ social interactions were with colleagues, either
in organised or informal after-work settings. Without the social elements of
work, the opportunities to collaborate, innovate and learn are also limited.

In a post COVID-19 world, it is critical for flexible workspace operators to

cultivate community by promoting wellness programs and thoughtful learning
opportunities, and to foster a collaborative environment that encourages
connection. We forecast that occupiers will seek out operators that can
deliver holistic offerings and manage their employees in a safe environment,
and that this will be a driver for greater levels of enterprise outsourcing.

FRAGMENTATION

Over the last five years, WeWork – fueled by

Soft Bank’s Vision Fund – grew exponentially,
taking up market share across regions. Now,
however, WeWork has started to hand back
space in some markets, creating something
of a power vacuum that will lead to a
fragmentation of operator market share.

For example, in the Hong Kong and Singapore

markets, WeWork accounted for circa 50%
of the operator take-up in 2019. However, in
2020 they are likely to take-up no new space
in Singapore, while in Hong Kong they are set
to hand back approximately 500,000 sq ft,
drastically changing market dynamics.

The effects of COVID-19 will likely accelerate
this fragmentation trend, with a clear need for
local market operating knowledge; however,
where operators do enter new markets,
they must take the opportunity to blend their
expertise in their home markets with strategic
local hires to deliver a compelling offering.
HUB | MELBOURNE
Coworking was built on the notion of
community. As a sector, it is critical we don’t
lose sight of this. Our members need this
more than ever and we are working to deliver
online and offline community to the market.
Dr. Richard Claydon
CEO roundPegz@theDesk | theDesk THEDESK | HONG KONG
 Actual 2019 Actual 2019
Forecast 2020 Forecast 2020 Flex as a % of
Operator Take Up Net Grade A Office Take Up Office Stock

MARKET SNAPSHOT (sq. ft.)¹ (sq. ft.)² (Q1 2020)¹

266,000 438,000
HONG KONG 3.0%
-150,000 -187,000

776,000 1,192,000
SINGAPORE 5.0%
51 79
$
SEOUL 200,000 -116,000
46 47
$
BEIJING 291,000 4,413,000

27 16
$
$ 394 $326 493 $107
BEIJING
97,000 4,128,000
4.0%

-140,000 4,146,000

420
SHANGHAI 5.0%
199
CHENGDU
93 19
$ $ $ 269,000 4,047,000

130 61
$

375
260,000 1,503,000

246
DELHI (NCR) GUANGZHOU 2.0%
$ $ SHANGHAI -86,000 3,175,000

$374 TOKYO

590
GUANGZHOU 55,000 1,117,000
CHENGDU 5.1%
50 $37 $ 86,000 1,001,000
TAPIEI
352,000 1,058,000
24 48
$ TAIPEI 3.0%

953
1,047,000
233 $21 $186 151 110
$
$
BENGALURU HONG KONG
321
$ TOKYO
586,000
530,000
7,122,000
3,398,000
2.3%

MANILA 374,000 3,053,000

SEOUL 3.0%

643
125 $85 124 $25 150,000 1,890,000

$ 697,000 3,847,000
MANILA 3.0%
485,000 3,863,000

SINGAPORE
1,847,000 9,458,000
DELHI (NCR) 6.0%
$ 217 1,100,000 6,620,000

110 20
$ 2,183,000 14,950,000
JAKARTA BRISBANE BENGALURU 4.0%
1,000,000 20,800,000
32 36
$
261,000 3,489,000
JAKARTA 3.7%

455
64,000 2,126,000

$ AUCKLAND 296,000 -514,000

SYDNEY 3.9%
13 $33 237,000 -886,000

228,000 -31,000

650 508
MELBOURNE 3.2%
77 39
520 $
110,000 751,000

Flexible Average Average

$
$ $
164,000 350,000
workspace desk cost rent Grade A BRISBANE 2.8%
centres (USD/month) (USD/sq ft/annum) 54,000 -122,000
MELBOURNE
3,000 73,000
79 57
$ AUCKLAND
72,000 158,000
2.0%

SYDNEY Source: Colliers International

1
Flexible workspace information relates to the CBD, except in the case of Bangalore, Beijing,
Chengdu and Delhi where it relates to the major business districts in these cities.
2
Grade A office market information relates to the CBD in these cities.
 NICK DAVIES JUSTIN LAM
Associate Director Associate Director

BRISBANE | AUSTRALIA +61 7 3026 3337

Nick.Davies@colliers.com MELBOURNE | AUSTRALIA +61 3 9612 8855
Justin.Lam@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Brisbane experienced strong growth in the flexible Occupier demand for flexible workspace remained
workspace sector in 2019, with the commitment of
several new locations (including Spaces Riparian Plaza
and WeWork Riverside Centre) as well as operator pre-
32 $ 455 $ 36 robust throughout 2019; however, take-up of space from
operators slowed in 2019 compared to the previous
two years, as operators took a more cautious approach
77 $ 520 $ 39
Flexible Average Average Flexible Average Average
commitment on space expected to be delivered over workspace desk cost rent Grade A following WeWork’s unsuccessful IPO. Notably, there workspace desk cost rent Grade A
the next 2–3 years. The continued interest by operators centres (USD/month) (USD/sq ft/annum) was some take-up recorded in fringe districts including centres (USD/month) (USD/sq ft/annum)
in Grade A and Premium Grade locations has attracted Creative Cubes taking over space from Asahi Beverages in
substantial enquiry allowing operators to open their doors South Melbourne and Spaces anchoring the new 71 Gipps
Actual operator take up 2019 Actual operator take up 2019
with above 50% occupancy. Landlords view flexible Street development in Collingwood.
workspace as a benefit to their assets not only in attracting 164,000 sq ft 228,000 sq ft
new occupiers but also allowing their existing occupier While new take-up in 2019 was subdued, we saw several
base to gain a level of comfort that they have the ability 54,000 sq ft flexible workspace locations open from deals that were 110,000 sq ft
to expand for short term projects if required. With the Operator take up forecast 2020 committed in previous years. This resulted in operators Operator take up forecast 2020
resource sector also showing growth during 2019, assets aggressively pricing in the form of rent-free and/or
with flexible workspace in situ are drawing the attention of reduced membership fees to secure occupiers. Most
Net Grade A office take up 2019 flexible workspace occupier transactions that occurred Net Grade A office take up 2019
large-scale occupiers.
350,000 sq ft were driven by short-term project space and swing -31,000 sq ft
space requirements.
2020 OUTLOOK: COVID-19 & BEYOND -122,000 sq ft 751,000 sq ft
Net Grade A office take up forecast 2020 Net Grade A office take up forecast 2020
COVID-19’s effect has caused flexible workspace operators 2020 OUTLOOK: COVID-19 & BEYOND
to see a slowing of enquiries, especially from small to
medium-sized tenants who are a major user segment. In Source: Colliers International. The information provided applies to the CBD only. Due to COVID-19, staff in most companies are working Source: Colliers International. The information provided applies to the CBD only.

some instances, occupiers who might typically opt for a from home, where possible, resulting in reduced demand
flexible workspace have moved to work from home for the for office space across the market. At present, occupiers
time being. Many occupiers have viewed the optional and
2019 MAJOR DEALS are typically opting out of any short-term memberships 2019 MAJOR DEALS
mandated working from home conditions as a success and until there is further clarity on return to work policies. In
as a result, they are looking to explore ways to optimise the longer term, we expect demand for flexible workspace
their workspaces by either consolidating into a smaller Name District Buildings Size (sq ft) to return; however, operators will need to plan and Name District Buildings Size (sq ft)

footprint, or alternating staff working from the office. Even Spaces CBD 80 Ann Street 64,583 implement appropriate measures to ensure the safety JustCo Western Core 15 William Street 89,340
larger institutional occupiers are considering whether they of its occupiers.
WeWork CBD 260 Queen Street 50,924 JustCo Western Core 447 Collins Street 50,795
still require a significant footprint in terms of committed
WeWork CBD 123 Eagle Street 48,201 From an operator growth perspective, we are expecting Hub Australia Civic 180 Flinders Street 47,404
space. Currently, the Brisbane market is expected to shift
more operators to move towards a management agreement
further towards a tenant favourable market, with occupiers Creative Cubes South Melbourne 111 Cecil Street 40,744
model to further align both operator and asset owner
viewing flexible workspace as a financially viable option Work Club Global Western Core 477 Collins Street 39,027
interests. For asset owners, such arrangements will be
for their executive and essential staff.
dependent on the covenant strength of the operator and Spaces Collingwood 71 Gipps Street 37,000
As occupiers continue to reimagine their workspace the value added to the asset in terms of amenity.
requirements, flexible workspace operators may see an
increase in demand. Given that asset owners are expected
to be heavily focused not only on customer retention but
also the attraction of new tenants, the deal terms being
offered to secure office space will undoubtedly see the
market remain fiercely competitive.

22 T H E F L E X I B L E W O R K S PA C E O U T L O O K R E P O R T 2 0 2 0 | C O L L I E R S I N T E R N AT I O N A L T H E F L E X I B L E W O R K S PA C E O U T L O O K R E P O R T 2 0 2 0 | C O L L I E R S I N T E R N AT I O N A L 23
 ROWAN HUMPHREYS CHARLES YAN
Director Managing Director | North China

SYDNEY | AUSTRALIA +61 2 9257 0358

Rowan.Humphreys@colliers.com BEIJING | CHINA +86 10 8541 1008
Charles.Yan@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Sydney, home to Australia’s largest flexible workspace There were eight mergers between flexible workspace
market, had a strong 2019, with aggregate vacancy
well below 10% by the end of the year in the sector.
Demand was led by multinational corporations that
79 $ 650 $ 57 operators in 2018. In 2019, we saw overall flexible
workspace demand marginally decrease as compared
to 2018. Additionally, WeWork’s failed IPO dampened
51 $ 394 $ 79
Flexible Average Average Flexible Average Average
required customised solutions, which could be operated workspace desk cost rent Grade A fundraising initiatives for local operators in 2019. workspace desk cost rent Grade A
on a plug-and-play basis. Finance, insurance, technology centres (USD/month) (USD/sq ft/annum) centres (USD/month) (USD/sq ft/annum)
and professional services occupiers led the demand for
flexible workspace in 2019. Another significant demand 2020 OUTLOOK: COVID-19 & BEYOND
Actual operator take up 2019 Actual operator take up 2019
segment included SME occupiers who prefer short-term SMEs are a core demand segment for flexible workspace
leases and flexible workspace operators’ policy of not 296,000 sq ft operators in Beijing. Due to COVID-19, this demand, 291,000 sq ft
requiring bank guarantees. particularly from new SME occupiers slowed down
237,000 sq ft 97,000 sq ft
considerably in Q1 2020. Many existing occupiers either
Operator take up forecast 2020 Operator take up forecast 2020
reduced their renewal lease durations or allowed them to
2020 OUTLOOK: COVID-19 & BEYOND
expire naturally at the time of renewal in Q1 2020.
WeWork, IWG and Victory are some of the operators Net Grade A office take up 2019 Net Grade A office take up 2019
opening new locations in 2020. So far, we understand that The overall Beijing office market recorded negative net
these planned locations will continue despite COVID-19. -514,000 sq ft absorption in Q1 2020. While we expect full-year 2020 4,413,000 sq ft
Flexible workspace operators’ primary focus is now on net office space absorption to be positive, albeit slightly
-886,000 sq ft below 2019 levels, overall market vacancy should rise to 4,128,000 sq ft
tenant retention given low vacancy in existing locations.
Net Grade A office take up forecast 2020 20%. From a flexible workspace operator’s perspective, Net Grade A office take up forecast 2020
Operators have seen an influx in rent relief requests.
Retention strategies include pausing memberships or the ongoing occupier shift towards remote working as
offering short term rent reductions of 20–30%, while Source: Colliers International. The information provided applies to the CBD only. well as the adoption of hub and spoke strategies should Source: Colliers International. The information provided applies to the CBD only.

working with asset owners to facilitate these requests. generate some demand for flexible workspace over the
The dedicated desks and hot desk segments of the rest of the year. Nevertheless, we expect new take-up by
sector have taken the biggest hit with a large portion of
2019 MAJOR DEALS flexible workspace operators to be limited and their focus 2019 MAJOR DEALS
these users cancelling memberships, where they had the to shift towards maximising occupancy at facilities that are
option to do so. operational now.
Name District Buildings Size (sq ft) Name District Buildings Size (sq ft)
We have seen the usage of flexible workspace locations IWG Core 60 Martin Place 47,361 WeWork Wangjing Parkview Place 108,000
hit as low as 5% occupancy recently, given businesses
JustCo Core 60 Margaret Street 26,910 KR Space CBD HNA Building 54,000
are adhering to government restrictions and implementing
work from home strategies; however, these should ease as Hub Australia Core 31 Alfred Street 25,207 My Dream Plus Wangjing East Bay International 45,000
Centre
occupiers return to work. Increased flexibility in incentives Victory Offices Midtown 85 Castlereagh Street 13,333
and terms are being offered to new enquires including WeWork Dongcheng Longfu Building 42,000
Victory Offices Midtown 85 Castlereagh Street 11,718
adjustable start dates, increased rent-free periods, and My Dream Plus Dongcheng Oriental Plaza East side 21,500
reduced desks rates on three to six-month terms. We also building
expect to see some operators facing financial difficulties,
especially those that are not well capitalised, in the
current environment.

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 LEON ZHU MAY KUANG
Senior Director Associate Director

SHANGHAI | CHINA +86 21 61414366

Leon.Zhu@colliers.com GUANGZHOU | CHINA +86 20 3819 3847
May.Kuang@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Take-up from flexible workplace operators peaked in 2018. Most flexible workspace operators expanded as planned
In 2019, while the local operators Distrii and Atlas were
actively opening new locations, there was muted demand
from international operators. However, the regional
130 $ 375 $ 61 with major deals for 2019 completed during the first half of
the year. In aggregate, Atlas, Left Nest, and IWG account for
one-third of the flexible workspace in Grade A buildings in
50 $ 374 $ 37
Flexible Average Average Flexible Average Average
operator, JustCo, took-up a new location at LL Land Tower. workspace desk cost rent Grade A Guangzhou and as such are the major operators in the city. workspace desk cost rent Grade A
Towards the end of 2019, WeWork paused expansion centres (USD/month) (USD/sq ft/annum) Overall office market vacancy rose marginally to 5.3% in centres (USD/month) (USD/sq ft/annum)
plans in Shanghai and started negotiations to exit leases 2019 from 4.5% in 2018. Nevertheless, we observed asset
in locations where it had not yet commenced operations. owners in the Pearl River New City (PRNC) district, which
Actual operator take up 2019 Actual operator take up 2019
is part of the Guangzhou CBD and a prime office district,
-140,000 sq ft adopt flexible lease terms to attract occupiers, some of 260,000 sq ft
2020 OUTLOOK: COVID-19 & BEYOND which were more competitive than the offerings from
269,000 sq ft flexible workspace operators. Towards the end of 2019, -86,000 sq ft
Approximately 27 million sq. ft. of new office space is set
to be delivered in 2020 and full-year overall office market
Operator take up forecast 2020 some operators surrendered their space in the PRNC. Operator take up forecast 2020

vacancy is projected to be 29% in Shanghai by end-2020.

A further 14 million sq. ft. of new supply is expected to Net Grade A office take up 2019 2020 OUTLOOK: COVID-19 & BEYOND Net Grade A office take up 2019
be delivered annually on average thereafter until 2024.
Over 2020 we expect rents to drop by 6.1% in 2020, 4,146,000 sq ft COVID-19’s immediate impact has been on the SME sector, 1,503,000 sq ft
and considering the supply pipeline, we forecast rents to which has a significant share of the demand for flexible
4,047,000 sq ft 3,175,000 sq ft
soften by approximately 1% annually for the next five years. workspace in Guangzhou. As a result, SMEs sought
Net Grade A office take up forecast 2020 Net Grade A office take up forecast 2020
Considering these market dynamics, we expect growth reduced rents and though operators acquiesced, we
from flexible workspace operators to be negative, with observed vacancy rates rising in the flexible workspace
new take-up attributable, for the most part, to partnerships Source: Colliers International. The information provided applies to the CBD only. sector in Q1 2020. Source: Colliers International. The information provided applies to the CBD only.

or management agreements with asset owners.

With no scope for inspections or viewings, office market
2019 MAJOR DEALS leasing came to a halt due to the city-wide quarantines 2019 MAJOR DEALS
in Guangzhou in Q1 2020. This led to negative net office
space absorption in the city for the first time since Q2
Name District Buildings Size (sq ft) 2012. Construction was also suspended during the Name District Buildings Size (sq ft)
Distrii Huangpu Silver Court 98,430 lockdown. As a result, we estimate 1.4 million sq ft of Yuejiang 368 Pazhou Guangzhou Daily 58,100
new supply scheduled for 2020 will spill over into 2021. Culture Centre
Distrii Pudong Micro Electric Harbor 80,000
Our overall outlook for Guangzhou’s office market sees Cohesion PRNC International 45,200
Distrii Jing An Daning Life Hub 69,000 vacancy increasing to nearly 12% in 2020 and the supply Metropolitan Plaza
MFG Huangpu K11 60,000 overhang lifting vacancy to 14% in 2021. We expect rents
Chirk Up Pazhou GZ The Place 16,100
to soften in 2020 before rebounding the following year.
Atlas New Jing’an 1FS 50,000 SkyC Tianhe North- CITIC Plaza 11,300
Occupiers are likely to adopt a flight to quality approach
Sports Centre
JustCo Jing An LL Land 40,000 considering slowing rentals in the overall market.

From a flexible workspace perspective, we expect local

real estate developers to continue to expand their own
concepts cautiously or partner with operators, bringing
asset ownership models to the market to mitigate
downside risks in 2020. Overall, we expect net take-up
by flexible workspace operators to be negative in 2020.

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 LIDIE LI SAYAKA MATSUMOTO
Manager Senior Associate Director

CHENGDU | CHINA +86 28 8658 6288

Lidie.Li@colliers.com HONG KONG +852 2822 0745
Sayaka.Matsumoto@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

When compared to 2018, Chengdu’s overall office market 2019 was a turbulent year for the flexible workspace
recorded an increase in rent as well as occupancy in
2019. As a result, flexible workspace operators who
were actively expanding in 2017 and 2018 took up limited
27 $ 199 $ 16 sector in Hong Kong. In the first half of the year, WeWork
doubled its footprint by adding approximately 500,000 sq ft
of space before its failed IPO. The Chinese operator KR
151 $ 953 $ 110
Flexible Average Average Flexible Average Average
space during 2019. According to our research, flexible workspace desk cost rent Grade A Space took four locations and then quickly retreated, workspace desk cost rent Grade A
workspace operators are now present in 44% of Grade A centres (USD/month) (USD/sq ft/annum) handing three of these spaces back immediately, with centres (USD/month) (USD/sq ft/annum)
office buildings within the CBD. new entrants, CEO Suite and Victory Offices, taking up
two of these three. The local operator, Campfire, which
Actual operator take up 2019 Actual operator take up 2019
in the previous year added three new locations began to
2020 OUTLOOK: COVID-19 & BEYOND 55,000 sq ft retrench, handing back its campus in Hung Hom and its 266,000 sq ft
Due to COVID-19, we expect the overall demand for office flagship facility in Causeway Bay.
86,000 sq ft -150,000 sq ft
space in H1 2020 to be subdued. However, demand from
Operator take up forecast 2020 Meanwhile, The Executive Centre reshuffled its portfolio, Operator take up forecast 2020
the finance, TMT, health and infrastructure sectors looks
exiting Three Pacific Place and 28 Hennessy, at their
relatively firm in the longer term. For H2, we expect
natural lease expiries, while adding Two Pacific Place
demand to benefit from policy support, e.g. reduced Net Grade A office take up 2019 Net Grade A office take up 2019
and PCCW Tower, continuing its longstanding relationship
financing costs and favourable tax breaks for negatively
1,117,000 sq ft with Swire Properties. Elsewhere, Garage Society moved 438,000 sq ft
impacted enterprises. Overall in 2020, we expect vacancy
from Des Voeux Road Central to Queen’s Road Central,
to increase to nearly 21%, up from just under 17% in 2019.
1,001,000 sq ft increasing its footprint. Activity in the second half of 2019 -187,000 sq ft
As a result, rents should fall and could prompt a flight to
Net Grade A office take up forecast 2020 was largely subdued due to social unrest. Net Grade A office take up forecast 2020
quality among occupiers.

Some of the challenges facing flexible workspace operators Source: Colliers International. The information provided applies to the major business
districts only.
2020 OUTLOOK: COVID-19 & BEYOND Source: Colliers International. The information provided applies to Hong Kong Island only.
include passing the high cost of rentals from 2018 and
2019 to their occupiers and lower demand from the 2020 is likely to be a challenging year for the office market
cost-sensitive SME sector, which has been a key source in Hong Kong. The flexible workspace sector is under 2019 MAJOR DEALS
of demand. However, we expect occupier requirements
2019 MAJOR DEALS strain given that much of the space currently occupied by
for social distancing and split operations to encourage operators is on leases with passing rents above-market.
demand for flexible workspace. The challenge will be to Name District Buildings Size (sq ft)
reconfigure existing layouts to promote appropriate social Name District Buildings Size (sq ft) WeWork has, thus far, handed back circa 30% of its Hong WeWork Tsim Sha Tsui The Gateway Sun 147,000
distancing. Additionally, we have seen some SMEs in DMS South Renmin Road Raffles City 26,694 Kong portfolio, having terminated its leases at Harbourside Life Tower
conventional office space planning to downsize or vacate HQ, 8 Queen’s Road East, Hysan Place, The Gateway and
The Executive East Avenue IFS 27,986 WeWork Kowloon Bay The Quayside 100,000
their current premises. This represents an opportunity for Centre two of the four floors at Hopewell Centre. With additional
locations under review, WeWork could end 2020 as it WeWork Central H Code 80,000
flexible workspace operators to capture demand as swing
space or reduced capital outlay options from this transition. started 2019; i.e. having around 500,000 sq ft of leased WeWork Admiralty Generali Tower 62,000
space. As many of these premises were fully built out,
WeWork Kowloon Bay Harbourside HQ 52,383
WeWork will have to absorb significant write-downs on its (Octa Tower)
capital expenditure. This situation could portray both the
WeWork Wan Chai Hopewell Centre 46,731
company’s global business and specifically its operations
across Greater China in a negative light. CEO Suite Tsim Sha Tsui K11 Victoria Dockside 25,258

Victory Offices Central The Centre 23,628

It seems likely that WorkTech will hand back all of its Hong
Kong locations in 2020, while IWG is handing back its The Executive Admiralty Two Pacific Place 22,060
China Resources and Harbour City premises, though it has Centre

added WeWork’s Hysan Place location to its portfolio and UpperPoint North Point Park Commercial 21,500
remains active in the market. The challenging business Centre
environment in Hong Kong means other operators may Compass Office Quarry Bay Chinachem Exchange 16,672
also return space and as a result we are likely to see Square
negative operator take-up of circa 150,000 sq ft by year- Fortune Business Admiralty United Centre 10,245
end. However, we do expect some enterprise demand to Service
buoy the sector in the second half of the year.

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 ARPIT MEHROTRA NEHA BHATI
Managing Director | South India Associate Director

BENGALURU | INDIA +91 99 6603 0144

Arpit.Mehrotra@colliers.com DELHI (NCR) | INDIA +91 81 3069 9522
Neha.Bhatia@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Flexible workspace accounts for approximately 4% of the We saw strong demand from flexible operators for space in
overall office space stock in Bengaluru. When taken in
isolation, the sector accounts for about 15% of the office
stock within the CBD; i.e. flexible workspace accounts
233 $ 186 $ 21 2019, accounting for nearly 18% of the gross take-up in the
market. Noida accounted for 48% of flexible workspace
operators’ take-up, followed by Gurgaon (38%), while the
93 $ 246 $ 19
Flexible Average Average Flexible Average Average
for a greater proportion of CBD stock. In 2019, flexible workspace desk cost rent Grade A remainder was in Delhi. Flexible workspace operators workspace desk cost rent Grade A
workspace operators leased approximately 2.2 million sq ft, centres (USD/month) (USD/sq ft/annum) saw their occupier demand come from both multinational centres (USD/month) (USD/sq ft/annum)
accounting for around 15% of the gross office space take- corporations and start-ups alike. As expected, this demand
up across the city. Operators continued their expansion, came from the information technology-business process
Actual operator take up 2019 Actual operator take up 2019
fuelled by demand from medium and large enterprises management; banking, financial services and investments;
in the city. Much of the leasing by flexible workspace 2,183,000 sq ft and fast-moving consumer goods (FMCG) sectors. 1,847,000 sq ft
operators was in the SBD, followed by CBD across both
Grade A and Grade B buildings. In 2019, Ascendas and 1,000,000 sq ft 1,100,000 sq ft
Brigade Group entered the Bengaluru office market with Operator take up forecast 2020 2020 OUTLOOK: COVID-19 & BEYOND Operator take up forecast 2020
their Bridge+ and BuzzWorks flexible workspace concepts, In Q1 2020, flexible workspace operators accounted for
respectively as well. 19% of the gross take-up in Delhi-NCR with approximately
Net Grade A office take up 2019 Net Grade A office take up 2019
340,000 sq ft, while the overall office market demand
14,950,000 sq ft began to slow in Q2 due to India’s COVID-19 lockdown. 9,458,000 sq ft
2020 OUTLOOK: COVID-19 & BEYOND
In the long term, the fundamentals remain strong and
20,800,000 sq ft 6,620,000 sq ft
In Q1 2020, flexible workspace operators accounted demand is likely to be driven by IT-BPM (business process
Net Grade A office take up forecast 2020 Net Grade A office take up forecast 2020
for about 11% of the gross take-up, approximately management) and consulting occupiers. However, we
0.4 million sq ft of space in Bengaluru. With India’s expect overall leasing activity to be muted as occupiers
lockdown going into effect on 25 March, COVID-19 did not Source: Colliers International. The information provided applies to the major business are reviewing their real estate portfolio requirements. Source: Colliers International. The information provided applies to the major business
districts only. districts only.
have an immediate impact on the office market. Flexible
workspace occupier demand was largely driven by local
operators during Q1 2020. Due to the impact of COVID-19,
2019 MAJOR DEALS 2019 MAJOR DEALS
the resultant lockdown and expectations around social
distancing norms, we believe flexible workspace operators
will slow their expansion over the next six months. We
Name District Buildings Size (sq ft) Name District Buildings Size (sq ft)
foresee some consolidation of operators taking place at the
entity level. Operators which invest in workplace hygiene Indiqube SBD Prestige Lexington 183,000 Smartworks Noida Plot #1&2, Sector 125 270,000
Tower
and sanitation as well as social distancing measures should 91springboard Noida The Riverside 100,000
see greater enquiries from small and medium enterprises, Simpliwork CBD Vaswani Centropolis 128,000
GoWork Noida Logix TechnoPark 67,000
since flexible workspace could reduce occupiers’ upfront Smartworks Whitefield DSR Technocube 92,000
capital expenditure. WeWork Gurgaon Vi-John Tower 60,000
WeWork ORR Soul Space Arena 75,000
Cowrks Gurgaon Unitech Commercial 50,000
Oyo SBD Ranka Junction 75,000 Tower

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 SURYO WIBOWO JOHN SUZUKI
Senior Associate Director Head of Tenant Representation

JAKARTA | INDONESIA +62 21 3043 6863

Suryo.Wibowo@colliers.com TOKYO | JAPAN +81 3 4540 8604
John.Suzuki@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

New space leased by flexible workspace operators was A shift towards asset-light business models dominated
65% lower in 2019 than in 2018. Much of this decline
can be attributed to WeWork’s failed IPO, which created
a negative perception in the market, especially among
110 $ 217 $ 20 the flexible workspace sector headlines in Japan
during 2019. On April 15, IWG completed a cash sale of
its entire business stake in Japan for JPY46.7 billion
493 $ 420 $ 107
Flexible Average Average Flexible Average Average
CBD asset owners. While international operators did not workspace desk cost rent Grade A (USD437 million) to franchise its 130 flexible workspace workspace desk cost rent Grade A
actively expand following WeWork’s failed IPO, there was centres (USD/month) (USD/sq ft/annum) location portfolio to a local conferencing operator, TKP. In centres (USD/month) (USD/sq ft/annum)
some take-up from local operators. partnership with Softbank, WeWork accelerated its local
market expansion, securing various prominent new sites
Actual operator take up 2019 Actual operator take up 2019
as late as the end of 2019. However, the market remains
2020 OUTLOOK: COVID-19 & BEYOND 261,000 sq ft fragmented, limiting the overall flexible workspace 586,000 sq ft
Jakarta’s start-ups and SMEs make up a significant inventory to 2.3% of total office stock, around 40% lower
64,000 sq ft than the weighted average of its peer cities in the region. 530,000 sq ft
portion of occupier flexible workspace demand, which
dampened in the wake of COVID-19. Office relocation
Operator take up forecast 2020 There has been growing occupier demand in fringe Operator take up forecast 2020

and expansion decisions from MNCs have also been districts and operators are taking up space to satisfy this
postponed. With widespread business disruptions, flexible demand. Asset owners have repurposed unused retail,
Net Grade A office take up 2019 Net Grade A office take up 2019
workspace occupiers which were due for renewal in Q1 dining, and hotel space to flexible workspace, typically in
2020 have either allowed their agreements to expire or 3,489,000 sq ft middle-income residential districts. Additionally, a network 7,122,000 sq ft
have not renewed to their full terms. With GDP projected of updated phone-booth office solutions (e.g., telecube)
2,126,000 sq ft has re-emerged with an introduction of digital passports 3,398,000 sq ft
to be sluggish, we expect a 10% decline in office rent
in 2020, followed by a recovery in 2021. However, we
Net Grade A office take up forecast 2020 across major station facilities. Net Grade A office take up forecast 2020

see five-year average rent growth at only 1.2%. In the

meantime, as Jakarta has been under partial lockdown, Source: Colliers International. The information provided applies to the CBD only. Source: Colliers International. The information provided applies to the CBD (central five
2020 OUTLOOK: COVID-19 & BEYOND wards) only.
we expect the supply pipeline to continue as planned over
the next two years. The impact of COVID-19 has softened short-term demand
2019 MAJOR DEALS in the Tokyo office market. However, in the long run 2019 MAJOR DEALS
With remote working accounting for the bulk of business we expect to see increased demand for office space to
operations today, occupiers are now reviewing their office accommodate social distancing requirements in a post-
and workplace requirements. We believe this will continue Name District Buildings Size (sq ft) pandemic world. Tokyo’s market dynamics continue to Name District Buildings Size (sq ft)
to depress occupier demand for flexible workspace, GoWork Sudirman Millennium Centennial 64,583 favour local landlords and developers as they are better-
increasing vacancy rates and putting downward pressure Centre WeWork Kamiya-cho Kamiya-cho Trust Tower 165,100
positioned to aggregate unused commercial office supply
on rentals in the sector. Additionally, we expect some WeWork Sudirman 18 Parc 53,820 with few balance-sheet concerns. More enhanced service WeWork Kanda Kanda Square 92,300
operators to terminate their head leases where possible, offerings have also justified their rent increases while
CoHive Thamrin Plaza Bank Index 31,798 WeWork Ikebukuro Hareza Tower 85,400
reducing the number of operational centres by the year- retaining occupiers. Flexible workspace operators looking
end. As in the case of other markets, flexible workspace CoHive Mega Kuningan Menara Prima 27,863 WeWork Nishishinjuku D Tower Nishi-Shinjuku 53,375
for market entry, or operators already in the market
operators in Jakarta may benefit from becoming temporary CoHive Sudirman ANZ Tower (Atria Tower) 25,833 seeking growth opportunities need to position themselves JustCo & Daito- Central Tokyo Four locations Confidential
solutions and as swing space for occupiers. However, we as service providers to asset owners. kentaku
expect WeWork’s ongoing performance to continue to GoWork Satrio Menara Standard 21,528
Chartered
have an impact on the wider sector. While net absorption from flexible workspace operators
JustCo Sudirman Intiland Tower 21,528 is likely to decline in 2020, we expect the overall
GoWork Satrio Menara Standard 13,993 operator take-up to remain solid at around 530,000 sq ft,
Chartered reflecting large pre-commitment over 623,000 sq ft being
secured before the COVID-19 outbreak. However, since
no new deals have been announced after the outbreak,
we forecast the future operator take-up to fall below
200,000 sq ft in 2021. Notable transactions already
announced include WeWork at D Tower Nishi-Shinjuku,
of around 50,000 sq ft and JustCo’s market entry in
partnership with Daito-kentaku.

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 JAY CHO ROB BIRD
Director National Director

SEOUL | KOREA +82 2 6325 1905

Jay.Cho@colliers.com AUCKLAND | NEW ZEALAND +64 9 356 8803
Rob.Bird@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Occupier demand for flexible workspace has expanded Record low vacancy rates in Auckland’s office market
beyond the IT-dominated Gangnam submarket to the
Gangbuk area. For the past three years, the flexible
workspace sector has been growing quickly due to the
46 $ 326 $ 47 coupled with strong occupier demand limited the ability of
the flexible workspace sector to expand at the same rates
experienced in previous years. However, a combination of
13 $ 508 $ 33
Flexible Average Average Flexible Average Average
activity of the major flexible workspace operators WeWork, workspace desk cost rent Grade A smaller operators that entered the sector as well as some workspace desk cost rent Grade A
IWG, JustCo and TEC. In 2019, JustCo opened five new centres (USD/month) (USD/sq ft/annum) acquisition activity boosted the overall footprint. Prior to centres (USD/month) (USD/sq ft/annum)
centres in Seoul and was the most active operator during the end of 2019 WeWork announced that it would enter
the year. Local operators such as Fast Five and Spark Plus the Auckland CBD; however, it is yet to take occupation.
Actual operator take up 2019 Actual operator take up 2019
have also been actively expanding in the market. Meanwhile, new flexible workspace of 3,000 sq ft was
374,000 sq ft added in the CBD, while approximately 32,000 sq ft was 3,000 sq ft
added to the metropolitan region. By the end of 2019,
2020 OUTLOOK: COVID-19 & BEYOND 150,000 sq ft there were 40 flexible workspaces across the Auckland 72,000 sq ft
Local flexible workspace operators, such as Fast Five
Operator take up forecast 2020 region, occupying over 624,000 sq ft of office space, many Operator take up forecast 2020

and Spark Plus, have continued to look for expansion running with occupancy rates of over 80%. The largest
opportunities, despite the impact of COVID-19. Fast Five operator by space occupied – Generator – accounts for
Net Grade A office take up 2019 Net Grade A office take up 2019
has 23 locations and 15,000 members, with an occupancy approximately 134,500 sq ft of space across the Auckland
of 97%, prompting the operator to plan an IPO later 3,053,000 sq ft CBD, equivalent to almost one-quarter of Auckland’s 73,000 sq ft
in the year. total flexible workspace. For the Auckland region, the
1,890,000 sq ft monthly cost for dedicated desk space in the CBD is 158,000 sq ft
Despite COVID-19, the demand for CBD offices in H1 2020 Net Grade A office take up forecast 2020 USD 508 per desk. Net Grade A office take up forecast 2020
remained stable. The net absorption in the GBD and YBD
decreased due to relocations out of the district. We expect Source: Colliers International. The information provided applies to the CBD only. Source: Colliers International. The information provided applies to the CBD only.
leasing demand delayed by COVID-19 to materialise in H2 2020 OUTLOOK: COVID-19 & BEYOND
2020, as the pandemic subsides. However, we expect While it is still too early to predict the full implications
expansion from flexible workspace operators to be muted 2019 MAJOR DEALS of COVID-19 on the Auckland office market, we expect
2019 MAJOR DEALS
in 2020. In the immediate future, we believe demand many occupiers will be reassessing their current leasing
for flexible workspace will come from occupiers seeking requirements and strategies, preparing for any changes
to fulfil business continuity requirements, rather than Name District Buildings Size (sq ft) that will need to be made as the situation evolves. Staff Name District Buildings Size (sq ft)
accommodating growth. JustCo CBD Seoul Finance Centre 80,700 productivity and collaboration along with flexibility in space Spaces Wynyard Quarter 155 Fanshawe Street 12,917

JustCo CBD Concordian Building 71,000

and lease-term length will likely become key requirements Generator Wynyard Quarter 10 Madden Street 10,764
Over the rest of the year and beyond we believe
for new leasing activity in the current uncertain economic
flexible workspace operators will differentiate their Flag 1 CBD Yonsei Severance Building 66,000 environment. This could assist the occupier demand for
product offerings and offer attractive alternatives to
Spark Plus CBD Centreplace 55,900 flexible workspaces.
traditional office space.
JustCo GBD Poba Gangnam Tower 25,200
While there is uncertainty on future growth rates in the
The Smart Suites YBD IFC 32,300 flexible workspace sector, the refurbishment of existing
and the development of new office premises expected
in the next 18 months could provide approximately
162,500 sq ft of new flexible workspace to the Auckland
CBD. This represents approximately 26% of the existing
flexible workspace across all of Auckland.

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 KEVIN JARA BASTIAAN VAN BEIJSTERVELDT
Senior Manager Director

MANILA | PHILIPPINES +63 2 8858 9018

Kevin.Jara@colliers.com SINGAPORE +65 6531 8630
Bastiaan.VB@colliers.com

2019 OVERVIEW MARKET DATA 2019 OVERVIEW MARKET DATA

Demand from SMEs as well as the influx of multinational 2019 was yet another record year for Singapore in terms
corporations and outsourcing firms looking for plug-and-
play offices led occupier demand for flexible workspace in
Metro Manila in 2019. We expect these sectors to continue
124 $ 321 $ 25 of flexible workspace operator take-up, with almost
800,000 sq ft of new space being leased, bringing the
total flexible workspace stock in Singapore to 3.5 million
125 $ 643 $ 85
Flexible Average Average Flexible Average Average
to lead occupier demand from now on. workspace desk cost rent Grade A sq ft. WeWork accounted for a quarter of the 2019 take-up, workspace desk cost rent Grade A
centres (USD/month) (USD/sq ft/annum) with its lease of 210,000 sq ft at 21 Collyer Quay, formerly centres (USD/month) (USD/sq ft/annum)
HSBC’s Singapore HQ, being the marquee transaction of
2020 OUTLOOK: COVID-19 & BEYOND the year. Major operators JustCo, IWG, The Work Project,
Actual operator take up 2019 Actual operator take up 2019
Metro Manila went into enhanced community quarantine Arcc Spaces, The Executive Centre and The Great Room
(ECQ) on 15 March and though the lockdown ended on 697,000 sq ft all remained active during 2019. 776,000 sq ft
31 May across the country, partial lockdowns exist,
485,000 sq ft With many CBD Grade-A buildings incorporating some 200,000 sq ft
particularly in Manila. When the quarantine is fully lifted, we
Operator take up forecast 2020 form of flexible workspace, some operators expanded Operator take up forecast 2020
are likely to see occupiers implementing social distancing
within fringe and suburban districts. WeWork and Keppel
measures. We also expect to see split operations and the
Land’s Kloud concept opened locations in Alexandra,
hub and spoke model deployed by occupiers in Manila. This Net Grade A office take up 2019 Net Grade A office take up 2019
while Garage Society opened its Changi Airport location.
could potentially fuel the demand for flexible workspace in
3,847,000 sq ft Occupancy within flexible workspace locations remained 1,192,000 sq ft
the short-term.
robust throughout the year at circa 90% making Singapore
We expect the overall Manila office market to see higher 3,863,000 sq ft one of the most mature flexible workspace markets in -116,000 sq ft
office vacancy in 2020 due to a slowdown in leasing Net Grade A office take up forecast 2020 the Asia Pacific. Net Grade A office take up forecast 2020
activity. Economic analysts and the head of the Philippine
Central Bank are expecting a recovery in 2021 and this Source: Colliers International. The information provided applies to the CBD only.
2020 OUTLOOK: COVID-19 & BEYOND Source: Colliers International. The information provided applies to the CBD only.
should support the expansion of business activities and
leasing transactions. We expect to see a greater emphasis So far in 2020, market activity has been subdued, with
on property management capabilities and asset owners 2019 MAJOR DEALS Singapore being in a COVID-19 circuit breaker since 2019 MAJOR DEALS
to work with existing and potential tenants in providing 7 April. Flexible workspace operators have had requests
flexible lease terms. for rental waivers from occupiers during this period and
Name District Buildings Size (sq ft) we understand that the majority have shared government- Name District Buildings Size (sq ft)
From a product perspective, we expect flexible workspace provided tax rebates with their clients. We expect flexible
KMC Solutions Makati CBD Armstrong Corporate 85,560 WeWork CBD 21 Collyer Quay 210,000
operators to incorporate better technology as well as Centre workspace operators to play a key role in the return to work
improving meeting experience as they aim to differentiate csuites (Lendlease) City Fringe Paya Lebar Quarter 72,000
WeWork Fort Bonifacio World Commerce 82,077 for many enterprises in Singapore, the scale of the sector
themselves in the market. Major occupiers which have Place creates an ability to offer a range of products to assist WeWork CBD Oxley@Raffles 71,000
held off expansion so far in 2020 might consider flexible occupiers in executing their post-COVID-19 occupancy
KMC Solutions Fort Bonifacio Net Quad 55,409 WeWork City Fringe PSA Building 61,000
workspace as an immediate solution. We also expect strategies. We expect flexible workspace operators to
flexible workspace operators to open facilities in the KMC Solutions Ortigas CBD The Podium West 53,641 JustCo CBD Centrepoint 60,000
slowdown their pace of acquisition in 2020, with any
fringes of major business districts in Metro Manila, near Tower
new take-up being driven by partnerships or management Bridge+ (CapitaLand) CBD 79 Robinson 56,000
residential areas to support a move towards the hub and WeWork Fort Bonifacio The Brilliance Centre 48,665 agreements with asset owners. JustCo City Fringe 51 Bras Basah Road 50,000
spoke model. With the need to bolster business continuity
Clock In Makati CBD One Ayala Tower 1 45,654
plans, we are also likely to see flexible workspace operators JustCo CBD Income@Raffles 50,000
expanding outside of Metro Manila and Luzon. The Executive Makati CBD RCBC Plaza Tower 2 19,072
JustCo CBD OCBC Centre East 45,000
Centre
The Great Room CBD Afro-Asia i-Mark 37,000
Common Ground Ortigas CBD IBP Tower 17,493

36 T H E F L E X I B L E W O R K S PA C E O U T L O O K R E P O R T 2 0 2 0 | C O L L I E R S I N T E R N AT I O N A L T H E F L E X I B L E W O R K S PA C E O U T L O O K R E P O R T 2 0 2 0 | C O L L I E R S I N T E R N AT I O N A L 37
 AMANDA YANG
Senior Executive Director

TAIPEI | TAIWAN +886 2 8722 8620

Amanda.Yang@colliers.com

2019 OVERVIEW MARKET DATA FLEXIBLE

In 2019 flexible workspace operators accounted for
nearly 30% of the gross Grade A office take-up in Taipei.
Occupiers using flexible workspace in 2019 were mainly 24 $ 590 $ 48 WORKSPACE
CONSULTING
multinational corporations, technology firms, and start-ups
Flexible Average Average
which wanted flexible lease terms as well as networking workspace desk cost rent Grade A
opportunities offered by the operators. centres (USD/month) (USD/sq ft/annum)

2020 OUTLOOK: COVID-19 & BEYOND Actual operator take up 2019

352,000 sq ft Colliers International’s global flexible workspace consulting team works

Taipei’s office market experienced limited impact from
COVID-19 in H1 2020, with demand remaining stable. with all stakeholders in the sector. Our team of in-house experts delivers
0 sq ft
However, we expect occupiers to postpone expansion and strategic advisory to operators, develops asset owners’ flexible workspace
Operator take up forecast 2020
relocation activities resulting in slowing net absorption
in H2. Similarly, there was little impact on the flexible
approaches, and unlocks opportunities with creative solutions for our
workspace sector in H1 2020, and in H2 a shift to split- Net Grade A office take up 2019 occupier clients.
office operations may result in increased demand for
flexible workspace from occupiers. 1,058,000 sq ft
Our integrated approach provides us with a holistic perspective on the
We expect to see the impact of COVID-19, on the Taipei 1,047,000 sq ft sector and our clients benefit from the team’s unparalleled track record and
office market, to come in the form of occupier rent relief Net Grade A office take up forecast 2020
experience. Acting exclusively as an advisor, with no competing product,
requests, downsizing, postponements of expansion, and
increasing numbers of unpaid leave workers. As a result, Source: Colliers International. The information provided applies to the CBD only. our independent market positioning allows us to provide uncompromised
we expect a slowdown in the overall office market from outcomes for our operator, asset owner and occupier clients.
H2 onwards, in turn leading to paused demand from
flexible workspace operators for new locations until the 2019 MAJOR DEALS
space taken in recent years has matured. OPERATOR OCCUPIER ASSET OWNER

Name District Buildings Size (sq ft) > Market Growth > Strategic Advisory > Strategic Advisory
WeWork Hsin Yi Exchange Square II 180,000 Strategy > Portfolio Diagnostics > Creative Positioning
JustCo MS-TN Cathay Min Sheng Chien 68,400 > New Location > Transaction > Transaction
Kuo Building Acquisition Management Management
TEC Hsin Yi Taipei 101 17,710 > M&A > Creative Deal > Feasibility and
> Fundraising Structuring Valuation

ABOUT COLLIERS INTERNATIONAL

Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services and investment
management company. With operations in 68 countries, our more than 15,000 enterprising professionals
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38 T H E F L E X I B L E W O R K S PA C E O U T L O O K R E P O R T 2 0 2 0 | C O L L I E R S I N T E R N AT I O N A L
Primary Authors
JONATHAN WRIGHT
Director | Flexible Workspace Consulting | Asia
+852 9020 9200
Jonathan.Wright@colliers.com

RAKESH KUNHIRAMAN
Senior Director | Research | Asia
+65 6531 8569
Rakesh.Kunhiraman@colliers.com

Contributors
TOM SLEIGH
Director | Flexible Workspace Consulting | EMEA

FRANCESCO DE CAMILLI
Vice President | Flexible Workspace Consulting | Americas

SAMI SCHIAVI
Manager | Flexible Workspace Specialist | Australia

HARRY FLOOD
Director | Valuation & Advisory Services | EMEA

For further information, please contact:

SAM HARVEY-JONES
Managing Director | Occupier Services | Asia
Sam.Harvey-Jones@colliers.com

DOUG HENRY
Managing Director | Occupier Services | Australia
Doug.Henry@colliers.com

MICHAEL BOWENS
Executive Director | Regional Tenant Rep | Asia Pacific
Michael.Bowens@colliers.com

ANDREW HASKINS
Executive Director | Research | Asia
Andrew.Haskins@colliers.com

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