Real Estate

The growing phenomenon of flexible workspaces

Catherine Talavera - The Philippine Star
The growing phenomenon of flexible workspaces
An example of a hybrid flexible workspace where serviced offices and co-working spaces co-exist.

Small businesses ride on bandwagon

MANILA, Philippines — The flexible workspaces sector shows potential for further expansion in the Metro Manila office market as traffic woes in the country’s capital continue to persist, property consultancy firms said.

“Given the unaddressed traffic situation of the country, the desire for convenient and accessible working space will continue to pose attractiveness to flexible workspaces,” Cushman and Wakefield said in its report titled “Standing Out: Differentiation Strategies of Flexible Workspace Operators in Metro Manila.”

Cushman and Wakefield defined flexible workspaces as a service agreement wherein a client can lease out space with terms that are relatively lighter than those for leasing a traditional office space. 

It added that there are different variants of flexible workspaces, but two of the most general categories are serviced offices and co-working spaces.

Serviced office refers to a shared office operated by a third-party who is responsible for the fit-out, the utilities, and the facilities that would be used by the clients. Rent is charged on a per seat basis, and there may be numerous clients that can be contracted to fill out the space. 

“The agreement determines which seats are dedicated for the client, and usually, clients from different companies are separated by dividers in order to promote privacy,” Cushman and Wakefield said.

In contrast, a co-working space refers to an open-seating setup, where a client can utilize the facilities of the operator. The client generally pays for membership, and is free to use the space on his or her own accord.

Cushman and Wakefield said that globally, flexible workspaces have already become an integral part of the office market.

On the local front, Metro Manila is already seeing the presence of serviced office operators such as Regus, Compass Offices, V Offices, and KMC Solutions, 

“With the increasing importance of agility for modern-day businesses, as well as the proliferation of virtual and remote employment, flexible workspace has grown dramatically,” the report said.

It added that property developers have also taken notice of this trend and recognized the growing potential of the business model, and started adding flexible workspaces to their portfolios. 

“Big names in the flexible workspace industry from all around the world also started coming into the country such as Spaces, Common Ground and WeWork,” the report added.

In a separate report, Colliers International Philippines identified flexible workspaces as one of the trends to look out for in 2019, and is projected to grow by 10 percent per annum over the next three years. 

“The tight Metro Manila office market, coupled with the emergence of a mobile workforce and firms’ drive to bring down operating costs has given rise to another office sub-segment – the flexible workspace,” Colliers said.

Among the factors to drive the growth of the sector is the continued rise of micro, small, and medium enterprises (MSMEs); influx of multinational corporations (MNCs) and outsourcing firms looking for plug-and-play offices; and the implementation of a set of policy reforms likely to improve the country’s business climate.

“Due to stiff competition in the market, we see flexible workspace operators differentiating their features,” Colliers said, noting that a number of operators are already incorporating yoga and art classes, gyms, and food and beverage outlets into their spaces. 

“We believe that co-living is another feature that flexible workspace operators in Manila should consider in 2019,” it added.

The property services firm added that flexible workspaces are also expected to rise in malls, hotels, residential towers, and dormitories for professionals over the next three years.

With the sector’s potential for growth, Cushman and Wakefield emphasized the need for flexible workspace operators to apply differentiation strategies as more players are expected to enter the market.

It identified three major points of differentiation namely niche, space and value-added services.

“Like any other business, flexible workspaces also determine their target market even before setting up a location. This predetermines the general direction of the service offerings of the operator, and affects key aspects of the business such as the business model, location, and costing, among others,” Cushman and Wakefield said.

In line with determining its niche, operators also need to identify which form of flexible office space they want to offer.

“While traditional flexible workspace operators primarily focus on serviced offices, new entrants (especially foreign ones) tend to offer more of the hybrid business model, or those with both private offices and hot desks,” the report said.

It added that hybrid business model can tap both individual and corporate clients, allowing them to get the best of both worlds. 

This is also seen as more stable than just offering co-working spaces as corporate clients would tend to avail of longer terms than individual clients would.

Apart from its niche, operators also need to differentiate the physical attributes of their spaces.

“There are many ways for which operators try to visually differentiate their space from its competitors, and these efforts usually become the feel of the space. The selected niche also has a role to play in determining the looks of the place,” Cushman and Wakefield said.

It added that there are three categories of ambiance of flexible workspaces in the country namely professional, creative and relaxed.

Meanwhile, Cushman and Wakefield said that offering value-added services is also important to set certain operators apart from the rest.

“These are additional services that are offered on top of the basic expectations from flexible workspaces which include workstations, printers, telephone, power, high-speed internet connection, and air-conditioning. While the quality of these basic commodities varies across operators, all these are  usually present,” Cushman and Wakefield said.

It cited 24-hour operation, complimentary food and beverages, events, recreational activities and provisional accommodation as among value-added services that may attract more clients.

Moreover, the property consultancy firm emphasized that the flexible workspace market is set for further expansion.

“It is further projected that more office space would be taken up by flexible workspaces, especially by the larger ones,” Cushman and Wakefield said.

“As this sector develops, more operators are predicted to enter the scene,” it added.

The report stressed that operators who fail to stabilize their businesses would find themselves losing the game.

 “In the end, differentiation is the key to achieve sustainability,” the report concluded.      – With Louella Desiderio

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