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CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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Prelude
Singapore’s entrepreneurship scene just
moved up one notch last year, with the Smart
Nation initiative taking shape in an
increasingly digitized world. Embarking on the
journey to build the world’s first Smart Nation,
Singapore aims to improve the lives of its
citizens through harnessing technology and
big data analytics. The objective of the
government is to encourage creative and
innovative use of technology across all
sectors, bringing about the transformation of
the innovation-intensive economy in the next
decade. The thriving start-up scene that
ensued has also revolutionized the real estate
space, and four major stakeholders are seen
to have evolved to drive the
co-working ecosystem:
Co-working Ecosystem
Operators
As start-up tenants are not in favor of
traditional leases, co-working space operators
have to innovate in order to keep up with the
changing needs of these tenants. The concept
of “co-working”, as we term it, which is similar
to the “sharing economy” business model,
is gaining popularity and has resulted
in more operators entering the
market.
Developers
Developers/landlords have been more
progressive as a key strategic partner
working with co-working operators and
start-up companies. They incubate
tenants and at the same time, create a
win-win situation for all, as there is
potential for further earnings from
boosting occupancies of existing
buildings.
Corporates
Corporates are gaining market shares
in the start-up scene as they launch
their own innovation centers or
accelerator programs. These
innovation centers evolve into
specialized “co-working space” that
only serves the needs of each
corporate as various tech and data
specialists
come together to incubate
ideas.
Government
The Singapore government strives to create
an innovation-based entrepreneurial
ecosystem that complements the Smart
Nation initiatives, enhancing the nation’s
competitiveness in the region. The
government has also sunk in
generous resources to ensure the real
estate environment is conducive for
start-ups even in the land scarce
city-state.
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CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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A Cushman & Wakefield Publication
Operators – Plug the Service Gap
As the city-state pursues its Smart Nation
vision, an increasing number of individuals
has emerged as independent workers,
entrepreneurs and freelancers. This group
generally prefers flexi-work arrangement,
particularly among the millennial. With the
growing need to house these workers,
Singapore’s first co-working space,
Hackerspace opened its door in 2009. In a
short span of six years, more than 36 co-
working offices can be found islandwide as of
February 2016.
Selling Points of Co-working Space
The average co-worker only uses his/her
space for less than 20 hours a week,
according to UK firm Emergent Research.
Thus, co-working operators are marketing
more than just an office table; the selling
points include the intangible qualities of
working in a creative sphere such as lease
flexibility, space for communal interactions
and invitations to networking events and
business contacts.
FLEXIBILITY
As these mobile tenants typically do not want
to be tied down by traditional leases of two to
three years, co-working operators charge a
monthly membership fee for the use of hot-
desking and shared facilities among other
things. This is achieved via tweaking the
number of membership purchases every
month. In addition, operators also cater to the
needs of the community by doing away with
rental deposits, a boon to cash-strapped
entrepreneurs. Memberships could cost as
little as S$240 for up to 40 hours per month.
This is considerably more affordable than a
short term lease at a centrally-located service
office where tenancies typically start from
S$600 per person per month.
COMMUNITY
Community is an essential part of the co-
working experience. Unlike serviced offices
where workers from different companies are
segregated into private rooms, co-working
spaces often have large open areas for hot-
desking, and devote a significant amount of
space to break-out areas for collaboration. In
general, most of these co-working spaces
apportion at least 50% of their floor space to
areas where co-workers can socialize,
collaborate and exchange ideas. The lack of
80%
of Singapore’s co-working spaces are located outside CBD
Locations of co-working
spaces in Singapore
CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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physical barriers helps to encourage
communication, cross-pollination of ideas and
foster creativity among workers. Today, such
work settings are highly favored by the tech
and creative industries as they allow workers
to feel less pressured in their working
environment.
NETWORKING OPPORTUNITIES
Another factor that sets co-working space
apart is the availability of networking
opportunities. Co-working members from the
same operator are encouraged to host and
join curated events as part of the community
bonding. Some operators even extend
professional services such as web designing,
accounting and legal support to start-ups. The
Hub Singapore, for instance, offers
mentorship, incubation opportunities
workshops and networking events to its 450-
member community.
Serviced Office Operators Wanting a Slice of the Pie
The provision of co-working space enables
serviced office operators to tap into a growing
and lucrative source of revenue. As many co-
workers do not utilize their space every single
day, co-working space operators are able to
sell more memberships than what the actual
maximum physical capacity allows in the
context of a traditional tenancy. This
translates into higher revenue per floor area
as compared to private serviced office rooms.
Besides providing hot-desking spaces, the
serviced office operators also incorporate
private rooms as they help to generate good
cash flow for the business until the co-working
community grows to a critical mass.
Break-out areas in JustCo’s co-working office
Co-working space at The Co
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A Cushman & Wakefield Publication
Developers – Breaking Traditions
At first glance, this type of leases are not
attractive to landlords who prefer larger
tenants with long leases over the co-working
concept. Long-term leases not only help to
ensure that landlords get a steady stream of
the rental income that is essential for their
asset value, they are also less costly to
manage compared to short-term tenants.
Use Co-working Concept as Hedge
However, landlords could face intense
competition as Singapore enters the next
wave of office completions of approximately
3.6 million square feet (sf) of net lettable area
in 2016.
Rather than engaging in an intense price-war
on rental incentives and subsidies, the co-
working concept might just be the blue ocean
strategy for landlords to gain a competitive
advantage over peers as it could help to
attract and retain quality tenants. One
suggestion might be for landlords to consider
bundling a portion of the vacant space
together with committed space under a “co-
working concept” for quality anchor tenants.
Landlords could convert undesirable or non-
performing space to cater to the needs of
tenants, while tenants will benefit from the
extra option to rent the co-working space on
an as-need basis.
First Mover Advantage
This concept could benefit the tech industry in
particular as international tech firms in
Singapore have been on an expansion trail
since the global financial crisis in 2009. A
basket of tech firms tracked by Cushman &
Wakefield shows that their space
requirements have increased by over 50%
annually on average since they first set up
permanent offices here. However, rigid terms
in their existing lease terms are stopping them
from instantaneously rescale their space
requirements. Thus, the co-working concept
presents itself as an ideal option for
businesses to scale up or down depending on
their performance without incurring hefty
upfront rental costs.
Indeed, some developers have already
tapped into the potential of this niche market
as they see it as the way forward. An example
is WorkSpace at Keppel Tower where the
landlord, Keppel Land, offers flexible office
arrangements to tenants so as to increase the
diversity of their tenant base, and at the same
time, boost the occupancies in the existing
buildings.
Hot-desking and
break-out areas at The Co “Rather than engaging in an intense price-war on rental incentives and
subsidies, the co-working concept might be the blue ocean strategy for landlords
to gain a competitive advantage over peers as it could help to attract and
retain quality tenants.”
CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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Workspace at Keppel
Corporates – the Bigger Picture
While Singapore’s start-up scene has a long
way to go before it can rival the scale seen in
other global cities, many corporates are
beginning to recognize the importance of
innovation and creativity. In line with
Singapore’s Smart Nation plan and with the
support of the Singapore government and
partners, various corporations have launched
incubators to bring in technology and
analytical data professionals and form their
own specialized teams.
Innovation Labs Germinating from Corporations
The banking sector saw HSBC launching a
Fintech innovation lab in Singapore with the
help and support from the Monetary Authority
of Singapore (MAS). Its innovation lab helps
to support the development and testing of the
digital and mobile banking services. In the
insurance sector, Metlife launched a 7,800 sf
innovation center called LumenLab to disrupt
new business models in the areas of
wellness, wealth and retirement. Others which
have joined the bandwagon to grow their
resident innovation labs include DBS Bank,
Accenture and Dell.
Some corporates help to drive innovation via
accelerators. These fixed-term, mentorship-
driven programs attract start-ups with the
hope of obtaining venture capital at a later
stage. Accelerators aspire to disrupt sectors
which have remained relatively unscathed by
the tech revolution. A prime example is Pi
Labs, which aims to drive tech innovation in
real estate. With Cushman & Wakefield as a
strategic partner, Pi Labs is able to empower
entrepreneurs with ready access to data and
mentorship from experienced real estate
professionals, enabling them to accurately
gauge the pulse of the market and fine-tune
their products.
Moving forward, we expect an increasing
number of corporations to make a concerted
effort to start or expand their own innovation
labs. Accelerator programs could also be
initiated where corporates have a vested
interest in the start-ups. This trend will help to
grow the demand for real estate space, a
boon for developers and landlords.
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A Cushman & Wakefield Publication
Pi Labs in London
CORPORATE-DRIVEN INCUBATORS IN SINGAPORE
“The convergence of property and technology will transform the way we and our clients
operate in the future. As a leading property adviser, Cushman & Wakefield is committed
to property and software businesses who will shape the future of our cities and buildings
and the way we work, shop and live.”
- Digby Flower
Chairman, UK & Ireland - Cushman & Wakefield
Corporation Industry Innovation Center Objective
Tech Internet of Things
(IoT) Lab
Develop & test Dell and Intel solutions, allow
for scalability testing
Banking &
Finance Life Analytics Lab
Process data from social media platforms to
generate new digital innovations and sales
leads
Insurance LumenLab
Develop disruptive new business models in
areas such as wellness, wealth and
retirement
Banking &
Finance
HSBC Singapore
Innovation Lab
Support development and testing of digital
and mobile banking innovation
Management
Consulting
Services
Accenture Analytics
Innovation Center
Develop new approaches for use of
analytics in key areas of services such as
public safety, service delivery, workforce
effectiveness etc.
CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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Government – Growing with Home-grown Start-up
The global start-up ecosystem ranking 2015 by Compass
Twenty years ago, most would only associate
budding start-ups with Silicon Valley due to its
proximity to the top tertiary institutions and
tech cluster. Today, start-up ecosystems
similar to that of Silicon Valley is rapidly
replicating itself around the world. In the 2015
Start-up Ecosystem Ranking conducted by
Compass, Singapore clinched the top spot in
Asia Pacific for its strong start-up ecosystem.
Its business-friendly environment is currently
a fertile ground for start-ups, with 2,400 -
3,600 tech start-ups calling it their homes.
Singapore’s start-up ecosystem ranks highest in Asia-Pacific
Singapore has established itself as one of the
leading innovation-driven economies as the
level of entrepreneurship has risen
considerably over the last decade. According
to the Global Entrepreneurship Monitor 2014
Singapore Report, its total early-stage
entrepreneurial activity (TEA) rate has
consistently ranged between 10% - 12% for
the past three years, in comparison to a TEA
rate of about 5% in 2006.
Singapore’s Total Early-Stage Entrepreneurial Activity Rate
2006 5% 2014 10-12%
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A Cushman & Wakefield Publication
Government Playing a Pivotal Role in Singapore’s Start-up Ecosystem
The Singapore government has been heavily
involved in the start-up ecosystem to push for
more innovation with the establishment of JTC
Launchpad @ one-north, also known as Block
71, the co-working enclave for start-ups and
incubators. Affordable rents, along with an
established vibrant community of start-ups
and the ease of access to important support
services and networking opportunities has led
to it being the favored choice for budding
entrepreneurs in the tech and media sectors.
Its current capacity of approximately 430,000
sf now houses some 40 incubators and 600
start-ups as of Jan 2016 and it aims to grow
its capacity to house 750 start-ups by 2017.
Besides providing space for incubators,
government financing such as the early stage
venture funding (ESVF) scheme is available
to local tech start-ups. More recently in
September 2015, it was announced that the
Singapore government would invest S$40
million through the ESVF scheme to
encourage large local enterprises to support
early stage Singapore tech companies in
building up specific technology ecosystem
which is crucial to Singapore in the shift to an
innovation-driven economy.
“Our clients of co-working spaces and
serviced offices in Singapore are keen to work
with us in other markets, such as our next
destination Shanghai. We aim to be the leader
of serviced office and co-working space
provider in Singapore and Asia-Pacific in the
coming years.”
- Kong Wan Sing
Founder & CEO of JustCo
Conclusion
Plenty of Room to Grow
The new wave of co-working offices catering
to other niche crowds has provided further
room for private co-working operators to grow
in the foreseeable future. A maturing
ecosystem allows new entrepreneurs to find
the required training, help, funding, and they
in turn help their peers and the next
generation entrepreneurs, who continue the
cycle forward. Singapore is seen to be
consciously creating this ecosystem in order
to take the economy to the next phase
forward, which could lead to itself drawing in
more talents, mentors, funding, and eventually
Source: JTC
JTC Launchpad
Future Capacity by 2017
Current Capacity 600 Start-ups
750 Start-ups
CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION CO-WORKING IN SINGAPORE: CO-CREATING A SMART NATION
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setting off a virtuous cycle to create not only a
business ecosystem, but also to help the
whole ecosystem to flourish beyond its
shores.
More players from overseas are also looking
to enter the Singapore market. Possible
entrants in the horizon may include American
co-working giant WeWork, Spaces by
serviced office operator Regus, and the Hive,
a co-working operator which has already
established three locations in Hong Kong. At
the same time, local co-working operators
have expressed their intentions of extending
their reach across the Asia Pacific.
These new entrants, however, will need to
play catch-up as the established players have
had a significant lead time in the build-up of
their communities. Nevertheless, their
presence will be a boon to the co-working
ecosystems here. Local co-working operators
could learn from the success stories and
employ tried-and-tested strategies by global
co-working players such as WeWork. Some
innovative strategies they could implement
include negotiating with the landlords for
longer rent-free periods, substantial fit-out
subsidies in exchange for signing longer
leases and generating additional revenue
from selling healthcare and other business
support services.
As co-working space in Singapore evolves
into the next phase of maturity, consumers
are on the winning end as they will benefit
from the wider range of concepts and greater
product differentiation over time.
©2016 Cushman & Wakefield.
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Christine Li Director, Research
+65 6232 0815
Goh Jia Ling Manager, Research
+65 6332 0885
Nicholas Chia Analyst, Research
+65 6332 0816