The Sudden Boom in Office Spaces: A Good Thing?
New York-based work space provider WeWorkCos has already invested $500 million in Southeast Asia and South Korea in an effort to expand globally
PHOTO CREDIT: Getty Images
It’s no secret that the demand for more co-working spaces is on the rise. Despite its nature as a relative newcomer, co-working spaces have found itself being adopted by a number of players all over the world, testing its strength in foreign waters—particularly in Asia Pacific.
In the Philippines, for example, the co-working industry just started in 2011 but already experienced a 61% growth in just four years. According to a report by the Colliers International, “[The] supply of these co-working spaces [will] grow by 10 percent annually in the next three years, spurred by a millennial-dominated labor force and a growing community of startups.”
In other parts of Southeast Asia, the battle for the best co-working space is heating up. New York-based work space provider WeWorkCos has already invested $500 million in Southeast Asia and South Korea in an effort to expand globally.
“As part of the effort, WeWork will acquire Spacemob, a Singapore-based co-working startup founded in early 2016 by entrepreneur Turochas ‘T’ Fuad and backed by Vertex Ventures and Alpha JWC Ventures,” said a Bloomberg report.
It’s therefore understandable that more players are attempting to ride on this wave to meet the global market’s demands.
According to Cushman & Wakefield’s Global Office Forecast report, more than 700 million sq. ft. of office space are currently being built and are estimated to be completed in 2019. To put that into perspective, that’s equivalent to five cities’ worth of office space inventory.
A worrisome trend
But when all these spaces do get built, who will occupy them? This is one of the concerns forecasters have with this sudden boom in office spaces.
With the increasing job growth worldwide and the demand for office spaces, it is predicted that as much as 520 million sq. ft. will fill the 700 million sq. ft. available by 2019. In any case, there won’t be enough supply of people occupying these spaces.
The GOF report says, “It will fall far short of supply, which will cause vacancy to rise in most cities around the world. From that perspective, the world is overbuilding.”
The right move?
“For example, they are very noisy environments, and it’s hard to get work done in a lot of these environments,” he said. “So when I looked at trends on where people are expected to be working overtime, those WeWork type situations were growing, then stalling. That’s the concern.”
Furthermore, there’s another tangential but equally important concern that threatens the whole issue on overbuilding. As an inherently American concept, co-working invites into the matrix untested variables by expanding into other cultures and industries.
“The other big concern is that this has been a traditionally US tech-focused attraction,” added O’Donnell. “You find a lot of US-tech based working in these environments, and whether that can transfer culturally and into other industries remain to be seen.”
With 55% of these constructions being led by the Asia Pacific region, particularly in the Beijing, Shenzhen, Shanghai, Manila and Bengaluru markets, forecasters remain optimistic about this growth.
For one thing, high-quality spaces in the States has accounted for 65% of all office absorption since 2012. “More often than not, developers have been rewarded throughout this cycle for delivering prime product, even in markets where vacancy is elevated,” says Cushman & Wakefield in a statement. “Additionally, the combination of an accelerating global economy with low interest rates is a recipe for healthy office-demand conditions.”
For another, there’s already a shift to these trendy and high-quality spaces from the older and more traditional arrangements in workplaces; that much is evident in the global expansion the co-working market has undergone.
“Developers are certainly placing some big bets on new product, but the bulk of it is concentrated in the major global cities, which is precisely where the greatest appetite is, for these shiny new buildings,” said Kevin Thorpe, Cushman & Wakefield Global Chief Economist. “I'm less concerned about the new space leasing up, because in a sense, that is supply rushing to meet demand. It's giving tenants exactly what they are asking for.”
BY Amanda Pressner Kreuser