CapitaLand invests S$27 million to enable “core and flex” in downtown Singapore
Flexible space and traditional offices are often thought to be mutually exclusive—meaning it’s either one or the other. In today’s market, we’re beginning to see how businesses can actually use both in tandem to meet changing needs. In recent news, CapitaLand—one of the largest traditional landlords in Asia—announced its investment of S$27 million for a 50% stake in The Work Project. Furthermore, the joint venture with The Work Project has, in turn, acquired Collective Works’ coworking spaces for an undisclosed amount. Until now, these steps would have seemed unusual for CapitaLand, who is mostly known for a portfolio of conventional offices and retail developments. In this article, we examine the larger trend of consolidation in the real estate market and how it could impact the future of workspace.
In March 2016, CapitaLand and Collective Works jointly developed the 12th storey of their headquarters at Capital Tower into Singapore’s first premium coworking space in a Grade A building. This venture represented the landlord’s first foray into understanding coworking spaces as flexible options for their existing tenants. Furthermore, this collaboration also made it possible for smaller businesses to work in a prime office building. Following on the heels of CapitaLand’s initiative, other Asian landlords, like Keppel Land, Mapletree, and Ascendas-Singbridge, have since launched their own coworking spaces.
Other property developers have also contributed to the trend of merging flexible and traditional spaces. In 2017, Lendlease announced plans for its mega mixed-use development at Paya Lebar Quarter (PLQ) that will include both traditional offices and multiple coworking spaces. PLQ is an interesting development—for the first time, there will be 2 flexible spaces operators in the same development. One will be dedicated to requirements of less than 50 headcount, with the other will offer enterprise solutions for up to 150 headcount. Why are we seeing this trend? What implications does it have?
Why are space operators consolidating?
- Growing demand for core-flex solutions
The growing demand for flexible workspace is a trend that traditional landlords can no longer ignore. JLL has predicted that by 2030, as much as 30% of corporate portfolios would comprise flexible space. Likewise, the number of people occupying flexible space could rise from just below 1 million in 2016 to around 3.8 million by 2020.
More importantly, it’s no longer just startups and small businesses who occupy flexible workspace. Coworking operators are beginning to tailor solutions for larger corporates, who are attracted to the flexibility, cost-effectiveness, and simplicity of these spaces. Beyond that, corporates see the value of coworking as a hub for innovation, giving them the opportunity to collaborate and learn from startups in relevant industries.
The idea of “core-flex” is when a business occupies both long-term office space (the “core”) and flexible space (the “flex”). For example, a company may want to have a traditional office for their headquarters. In addition, they can utilize coworking spaces as satellite offices for specialized teams or to manage fluctuations in headcount. In other cases, they may simply be attracted to the open, community vibe of coworking that could help improve employee satisfaction. For whatever reason, there is a tangible demand for core-flex offerings that bring together the best of both worlds. Landlords can add more value to their buildings by providing these flexible solutions for their existing tenants.
- Mutual benefits for coworking operators and landlords
Because of the rapid growth of flexible space in Asia, there are many players in the coworking scene with seemingly little differentiation. In this fragmented market, it could be strategic for coworking operators to consolidate under a larger brand to quickly scale and gain visibility. Consolidation has also taken place among coworking operators themselves—one notable example is WeWork’s acquisition of Spacemob in Singapore back in 2017.
Additionally, a joint venture model or partnership is the most strategic move for both large investors (e.g., CapitaLand) and coworking operators (e.g., The Work Project) alike. Local coworking operators can gain exposure and grow quickly without having to raise too much of their own capital. In turn, property giants who already have ample investing power can gain the credibility and knowledge to enter the flexible space market. With a reputable, branded coworking space like The Work Project in the building, tenants are more likely to expect a similar high level of quality from the rest of the building.
What does this mean for tenants?
- Just one landlord
It can be an administrative nightmare for businesses to manage multiple office locations. They would have to negotiate with different landlords and different coworking space operators, making the leasing process inefficient and complex. Through consolidation, tenants can lease both “core” and “flex” offices with just one landlord. As seen in the case of Collective Works Capital Tower—both core and flex offerings are conveniently located in the same building!
- More extensive network of connections and resources
The founder of Collective Works, Jonathan O’Byrne, said in a statement: “Ultimately, it made sense for the coworking [option] to be incorporated into CapitaLand’s vision as it will provide future growth pipelines and an enhanced network and platform of amenities for our members.”
In the case of Ascendas-Singbridge’s thebridge, for example, members of this coworking space are given exclusive access to an Asia-wide network of 2,400 enterprise businesses who occupy Ascendas’ portfolio of properties. While it remains to be seen what additional perks members of Collective Works can expect, the acquisition will likely bring about stronger connectivity for the coworking platform and its members.
- A wider range of workspace options
Above all, small and medium-sized enterprises can greatly benefit from access to more workspace options. In line with CapitaLand’s core-flex vision, existing tenants can more readily occupy both traditional long-term offices and desks at a coworking space—all operated by the same landlord. Putting together CapitaLand’s flexible spaces at Capital Tower and Asia Square Tower 2, as well as The Work Project’s current locations in Singapore and Hong Kong, the landlord now operates more than 177,000 square feet of flexible workspaces!
This expansion serves to bolster CapitaLand’s goal for an ‘office of the future.’ In their words, this vision refers to “an ecosystem of innovative workplace solutions that are community-driven, tech-enabled and provide value-add for all tenants.” With large stakes in both The Work Project and Collective Works—two premium coworking brands—this vision may become a reality sooner than we think!
Further consolidation is inevitable in the world of workspace. The flexible space market in Asia has grown rapidly over the past couple of years, resulting in fragmentation across individual spaces. Landlords like CapitaLand are seizing the opportunity to bring these different offerings together to address the growing business demand for core-flex solutions.
This movement towards consolidation is testament to how flexible and traditional spaces can work well in tandem with one another. Corporates can benefit immensely from a “hub-and-spoke” system where coworking spaces are used to complement an existing long-term office. To learn more about these possibilities, read our article on how MNCs can benefit from coworking.
At GorillaSpace, we’ve helped similar businesses find the right core-flex solutions. On our platform, you can browse through both “traditional” long-term spaces and flexible spaces in Singapore. You can get in direct contact with landlords and coworking space operators. And don’t forget—when you book any workspace through GorillaSpace, you get 20% off 1 month’s rent.
If you have specific requirements, use GorillaMatch to get targeted responses to your business requirements. All you have to do is list your requirements and our engine will link you up with only the most relevant spaces. Looking for someone to talk with about your search? Reach out to our Space Experts at [email protected] or +65 3163 6839.
- CapitaLand: CapitaLand launches office of the future.
- Straits Times: CapitaLand joint venture acquires Collective Works.
- Business Times: Lendlease joins growing trend of developers running coworking spaces.
- JLL: Flexible space in Asia Pacific
- Tsinghua University: A Study of the Coworking Model
- thebridge: Not all coworking spaces are made the same.
- Deal Street Asia: CapitaLand acquires 50% stake in co-working space firm The Work Project