Exciting things are happening in the world of work – under the overarching influence of technology and the burgeoning Internet of Things (IoT), not only is the way of doing business evolving but where it is done. Jonathan Wright, Associate Director of Office Services, Colliers International, talks about the growing demand for flexible working spaces in Hong Kong, the impact of this working arrangement on employee productivity and motivation levels, and the implications of this trend for traditional office-based companies
By Jennifer Khoo
While it probably surprises no one that Hong Kong was crowned the world’s most unaffordable housing market in 2016 for the sixth consecutive year, few may realize that Asia’s world city currently also boasts the most expensive office rental market on earth. In light of this finding, research has also shown that demand for flexible workspace is rising across Asia, particularly in Hong Kong and Singapore.
According to a June report released by Colliers International, there is a general expectation that flexible working operators will lease 20 percent more office space in 2016 than the total leased by Chinese companies in the city last year.
The expectation is based on findings that Chinese companies secured 400,000 square feet of office space in Hong Kong under new leases in 2015, whereas flexible workspace operators secured 252,000 sq. ft. of space in Hong Kong over the first five months of 2016 alone, with a forecasted 475,000 sq. ft. to be taken up by end of year.
According to Colliers, the steady emergence of flexible workspace operators can be attributed to one or more of the following factors: shrinking budgets (a characteristic of the current economic climate), a growing millennial workforce that values work flexibility and opportunities for collaboration, as well as the growth in FinTech (financial technology) and start-ups of internet applications across Asia.
Whether the growth of technology ventures is a result of the Hong Kong government’s StartmeupHK program, its recent announcement of a HK$2 billion (US$257 million) Innovation and Technology Venture Fund, or the fact that Alibaba poured HK$1 billion (US$128 million) into its Hong Kong investment program for start-ups just last year, one thing is clear: the demand for flexible co-working spaces has risen alongside a surge in the technology start-up scene, and it is expected to continue.
The overall concept of a flexible workspace encompasses both traditional private serviced offices and open-plan co-workspaces, though the domains are increasingly converging, and most operators offer both options under one roof. In both cases, operators lease space within a building from a landlord and fit it out with desks and IT equipment, before renting out the furnished space to end-users on an hourly, monthly or yearly basis.
The only difference is that end-users of a serviced office utilize a private area within the building, while those in a shared co-working space conduct their business in an open-plan work environment. This arrangement is popular among end-users in similar fields of work, who enjoy the benefits of a communal atmosphere in a flexible, well-designed work environment.
According to a research paper published in the Journal of Organizational Behaviour in 2012, it was discovered that people who had worked in a co-working space reported levels of “thriving” amounting to an average score of six on a seven-point scale; in comparison, their traditional office counterparts reported markedly lower levels of thriving and enthusiasm about their current setting.
A survey by the Harvard Business Review of several hundred workers from dozens of co-working spaces across the US revealed three rather unsurprising findings about the link between work environment and feelings of “thriving.” It showed that people who use co-working spaces: 1) see their work as meaningful, 2) feel as though they have more job control, and 3) feel part of a community.
Seeing work as meaningful: Aside from the type of work they were doing, survey participants reported finding meaning in feeling able to be their true selves at work – something they felt that being in an unconventional work environment allowed, in contrast with most traditional office settings which can be riddled with internal politics and clouded by an atmosphere of direct competition among peers and colleagues.
Co-working spaces often host users coming from an array of different industries, companies and projects, allowing occupants a much stronger sense of work identity. Additionally, given the fact that each person has a unique skill set in an environment which encourages sharing and collaboration, it is easy to see how one can ascribe meaning to feeling useful and distinctive.
Having more job control: Survey results showed that having decision-making power over one’s working environment and schedule boosts productivity alongside efficiency. Accessible 24/7, flexible work spaces provide users with the options of quiet, private spaces when uninterrupted concentration is required, and open collaborative spaces when interaction is required, allowing workers to choose whichever environment is most suitable for the task at hand.
The results further suggested that total autonomy at work only aids productivity to an extent; even the most independent workers benefit from some form of structure in their routine, and being part of a co-working community provides just enough of it to spur on motivation without the constraints of a conventional office space.
Feeling part of a community: Identifying with a community is one of the main reasons that flexible workspace users report high feelings of thriving and productivity. US operator WeWork, which recorded a valuation of US$16 billion this year, emphasizes how it seeks to create “a place you join as an individual, ‘me,’ but where you become part of a greater ‘we.’”
However, along with access to a community and an environment conducive to interaction, co-workers have the option to be left alone if they do not wish to be disturbed, by choosing to work in a quiet space or private room. In light of the growing body of research on the subject, workplaces are full of people with unique working styles who are at their happiest and most productive when given the space and support to be their true best selves.
Implications for companies
An increasing number of traditional office-based companies have begun to warm to the idea of leasing flexible office space in recent years, particularly as it offers a cost-friendly alternative to binding leases in the current time of economic difficulty, but also due to changing perceptions about the types of tenants that flexible office spaces are suitable for.
Although stereotypically thought of as a realm reserved for entrepreneurs, freelancers and the tech industry, an increasing number of MNCs have begun to see the wider potential of the flexible office space for their own employees.
“In uncertain economic times, the ability to take space on flexible lease terms is a huge advantage,” Wright explains. “This means companies can take as much or as little space as they need on a month by month basis – this suits companies better than three or six year leases. In addition, there is no capital expenditure required, which is another advantage over a traditional lease.”
Aside from the beneficial cost and flexibility aspects, an increasing number of operators are working to challenge any misconceptions about flexible workspaces as inferior work environments, by establishing a presence in Grade-A, prime office buildings in upmarket locations around the world.
One such example is Australian operator Servcorp, which prides itself on only leasing space in prime commercial real estate, occupying 22,000 square feet of space in the IFC Two in Central, one of Hong Kong’s most prestigious and iconic commercial buildings in the heart of the city’s financial district. Listed with a market capitalization of US$500 million, it now has a presence in 52 cities globally, with UBS of Switzerland and the UK’s Guardian newspaper as clients.
Another example is aforementioned US operator WeWork, which is now one of the world’s most valuable start-ups at just 6 years old, having raised around US$430 million this year in a new round of financing led by Chinese private equity investors for its expansion into Asia, including the opening of two new Hong Kong offices in the bustling hubs of Causeway Bay and Wan Chai.
Other operators with a presence in upmarket locations across Asia include Luxembourg-based company Regus, as well as privately owned and Hong Kong-based Compass Offices and The Executive Centre, both of which are expanding rapidly across the region and beyond.
Furthermore, the growth in FinTech and internet applications in Asia is reinforcing the surge in the supply and demand of flexible workspace, he adds. “We see large banks and financial groups are increasingly trying to adopt FinTech solutions in order both to rationalise their operations and to defend themselves against new challenges.”
Despite this, some initial resistance to the flexible-workspace concept is to be expected, particularly in Mainland China and Hong Kong markets, where traditional practices relating to workplace hierarchy are deeply ingrained, and where having your own office is seen as an indication of seniority.
However, Wright expects the idea will become more accepted over time as everyone uses the same desks and greater interaction takes place. “There is no doubt that expansion of the flexiworkspace market will be exponential in Asia,” he says. “WeWork has certainly grabbed the headlines this year taking up over 150,000 sq. ft., and everyone is excited to see how they fare in the Hong Kong market.”
“We believe they will continue the success from their other markets and expand further,” he adds. “Other operators will follow suit, with Regus’ new concept ‘Spaces’ being rolled out amongst others.”
There will always be a need for certain companies to have their own designated offices, Wright notes. “Law Firms require privacy; banks must have their own offices for certain operators. However, we see the majority of industries embracing flexible solutions in part or as a whole as time moves on.”