Co-working Space A Growing Industry
BY JOTHAM LIM
About a decade ago, start-ups and freelancers find it hard to secure a place to congregate and work. Their options were limited to renting an office lot, working from home or in a cafe.
No right-minded business owner will rent an entire lot just to use a room. In this digital era, most companies are of smaller size than before, requiring fewer people to operate, but each square feet of office space is just as expensive as before.
Faced with options that are either expensive or impractical, small companies are in need of low-cost and low commitment spaces. This demand has laid the foundation for the emergence of co-working spaces.
Co-working spaces house multiple companies under one roof, allowing tenants to share common infrastructures, have better communication with each other, and most importantly, have a better working environment on a smaller budget.
TYPES OF CO-WORKING SPACES
In the heart of Taman Tun Dr Ismail (TTDI), operating 24 hours a day, is a co-working space called WorQ. It goes by the motto of “Get better work done together”.
WorQ Chief Executive Officer (CEO) Stephanie Ping explains that the co-working spaces in Malaysia have slowly branched out into two categories, namely serviced offices and community-based spaces.
“Serviced offices are just office spaces that have been partitioned and furnished by the landlord,” she says. “Rented out on a monthly or yearly basis, these spaces can be easily managed by a single person, only requiring them to collect rent and provide simple maintenance.”
“The business is relatively easy to start, run and manage. That is why the serviced office industry is growing rapidly in Kuala Lumpur.”
Explaining further, she states, “On the other hand, community-based spaces are managed by a committee that is interested in building a community, rather than just renting out a physical space. Events are conducted on a normal basis and tenants are encouraged to learn and work with each other.”
“Many community-based spaces are backed by seed programs and incubators. Thus, they are incentivised to help grow the companies and tenants inside their spaces. Eventually, these companies will provide stable rent, foster long-lasting relationships with other tenants, increased overall productivity and cultivate better working environment.”
Stephanie stresses that flexibility and relationship building are key concepts of community-based space. “Our contracts can range from one day to three years, as we do not want to tie down our tenants if they are facing financial troubles. That is why community-based spaces do not grow as quickly as serviced offices because building a community takes up a lot of time and effort.”
OFFICE SPACE OVERSUPPLY
Property Insight also got in touch Scoopoint CEO Tan Li Mei, who operates her co-working space in Penang island.
Commenting on the office space oversupply issue in Malaysia, she says, “Co-working spaces are definitely helping to ease the issue. Developers and agents have been struggling for sales a few years back. As the industry grows, I have seen several office lots being bought out to be converted into co-working spaces.”
On the other hand, Ping assures that co-working spaces has little to do with the oversupply issue in Malaysia.
“Look at Hong Kong and New York. These huge cities lack office spaces, yet the co-working space industry is booming over there. The office space market in Malaysia is so big that our industry would not make a large impact on it.
INDUSTRY PERFORMANCE
Tan says that the industry has grown rapidly and captured a lot of attention recently. “When I started my company one year ago in Penang, there were only two co-working spaces running on the entire island. Now, there are already at least 20 spaces in operation.
“There is certainly a high demand for co-working spaces. While Kuala Lumpur is focused on catering to corporate and small and medium enterprise (SME) clients, we shift our focus more towards freelancers and small start-ups, as they benefit more from our services.
“But, not many people are aware of the co-working spaces in Penang yet. Those who do know of our industry are very interested in our services, but it will take a while for them to adapt and adopt a new way of working.”
The Penang market is significantly smaller than Kuala Lumpur, hence most co-working spaces are competing based on price instead of value and service, she says. “But again, there is still market demand, and the pie is big enough for everyone to enjoy.
“We are also struggling to compete with established international brands like Regus, but we are looking to do things differently and find more ways to add value to our customers,” she adds.
Tan reveals that Scoopoint has a general occupancy rate of 55 per cent to date this year. “In just one year, we have fully rented out our small offices and dedicated desks. However, we are having trouble renting out our large office spaces.
“There is a high demand for low commitment spaces. That is why we provide daily passes or even hourly rates. We don’t want to impose restrictions onto our customers. They can come and go as they please,” she says.
On the other hand, WorQ is currently adopting a Hyper-Localised-Community concept.
“Each office has their own individual culture and demographics. Our TTDI office has many digital nomads, while others have logistic companies. We customise our events and workshops and provide unique services to cater to their specialised needs.
“Despite our high turn-over rate, our offices are mostly occupied all of the time. We will open up a new office in Subang, and I am very optimistic about the outcome,” says Ping.
“Malaysia has only a few major cities with a small market. So, we are looking to leverage the suburban areas and small towns throughout the country. There is an untapped market out there, and I see great potential in that.”
FUTURE EXPECTATIONS
When asked about the industry’s future, Tan says, “The industry will definitely grow bigger. In fact, we are going to launch a new office in Kuala Lumpur and looking to expand towards Vietnam. We have already made plans for app development, building an online community and expanding our database.
“For those who are looking to break into this industry, my advice is to cater to a niche audience. For me, I’m focusing on creative entrepreneurs, but there are plenty of other options out there.”
Ping also expects an optimistic future for the industry. “However, I am expecting a totally new industry to emerge soon, probably more revolutionary than co-working spaces. When the market remains stagnant for too long, new innovative ideas will take over the market by storm. I’m looking forward to what the future has in store.”