Organic Growth for Flexible Space in the Future
Flexible space providers including serviced offices and co-working space have been expanding aggressively over the last two years in Bangkok. By the end of 2019, the total flexible space supply will have reached 121,000 sq.m., yet this will account for only 1.6% of the total Bangkok office supply. This is relatively low when compared to other cities in the Asia-Pacific region, for instance, Hong Kong at 3% and Singapore at 4.6%. This shows that there is still considerable room for growth in the future.
Due to the surge of flexible space supply and the growing number of operators entering the Bangkok market, competing to attract members will be the key challenge. As a result of this, CBRE believes operators will come up with not only more appealing packages for members but also more creative strategies with landlords to drive occupancy and profitability. These strategies include customizing enterprise solutions, forming partnerships with landlords, targeting a niche segment, and adopting a more careful site selection process – to name a few.
Given the economic instability, especially for startups and SMEs, flexible space operators are expected to continue developing their business and strengthening relationships with large corporate clients not only because they have the financial capability but as they also significantly uphold the reliability and brand image of operators. Recognizably different, large-sized clients today are offered a variety of customization options ranging from regular membership packages to multiple fit-out solutions thereby offering more value-for-money deals to clients.
Although an uncommon practice in Bangkok, we are starting to see partnerships between landlords and flexible space operators in the market, particularly in secondary locations far from mass transit stations. Notable examples include SPACES, opening its first partnership center at Phahonyothin 19, and HQ, opening two branches at Metropolis Samrong in 2020 and Sukhumvit 24 in 2021. It makes perfect sense for operators to expand their portfolios by partnering with landlords as they would essentially become a more asset-light company, downsize CAPEX to open new branches, and reduce rental overhead which is a business’ biggest cost, and vice versa, a landlord with vacant space in any type of building would be able to turn unutilized space into flexible lease space with meeting rooms and cool amenities. It is a win-win situation where both sides help each other remain competitive in the market.
We believe flexible space operators in Bangkok will soon provide unique offices and service products to accommodate niche industries. An operator in Hong Kong who built photography studios, sound recording rooms, and a catwalk to cater to the need of creative industries – fashion, design and media is a case in point.
A key to business success for flexible space operators is no longer fast expansion, but rather strong occupancy. Consequently, site selection has become a priority and a heavily reviewed process which is contradictory to what we have seen in the past where the focus was on growing the footprint. CBRE expects to see a more think-outside-the-box approach from operators in terms of site selection which could be a conversion of unutilized space in shopping malls, hotels or standalone buildings.
“Going forward, flexible space will focus more on organic growth than heavily expanding their footprint. With this new direction, the flexible space arena is expected to gain more traction from both members and landlords as the former will enjoy extensive services and perks which cater to their industry's needs while the latter are being offered opportunities to capitalize on vacant space,” said Ms. Roongrat Veeraparkkaroon, Head of Advisory and Transaction Services - Office, CBRE Thailand.
An article written by Maychaya Kitilimtrakul, a senior analyst at Research and Consulting, CBRE Thailand for Bangkok Post dated 16 October 2019.