WHILE flexible workspace take-up fell to the lowest in five years, some co-working companies continued pushing on with expansion plans in 2024. 

An estimated 45,000 square feet (sq ft) of space was taken up by flexible space operators in 2024, down from the pre-pandemic peak of around 700,000 sq ft in take-up in 2019, according to figures compiled by Colliers for The Business Times. 

Take-up refers to the new space occupied by flexible operators every year.

The pace of co-working expansion has slowed significantly post-pandemic, as operators take on a cautious stance and prefer a capital-light model amid a heightened interest-rate environment, said Wong Xian Yang, Cushman & Wakefield’s research head for Singapore and South-east Asia. 

Tricia Song, CBRE head of research for South-east Asia, said: “The business model for some co-working locations, particularly those in certain prime core Central Business District (Grade A) buildings, has become unsustainable. High rental costs, coupled with additional fit-out expenses,  result in increased costs being passed on to tenants, which undermines the viability of their business case.” 

Alan Cheong, executive director of research and consultancy at Savills Singapore, noted how co-working operators are often funded by venture capitalists, and thus have a different growth model, placing market share capture ahead of cash flow.

“From 2022, venture capital funding skewed towards artificial intelligence-related businesses (and) co-working operators are finding greater resistance in fundraising and this may hamper their expansion plans.” 

Still, the flexible office market continues to grow, but at a slower rate, CBRE’s Song said.

As at the end of the third quarter, net of closures, there is a marginal expansion of 1 per cent in the overall flexible workspace market in Singapore compared with that as at end-2023, according to CBRE data. Year-on-year growth in the flex market stood at 3 per cent in 2023, after peaking at a 34 per cent increase in 2018.

In 2024, notable closures included Distrii vacating about 60,000 sq ft of space in Republic Plaza in March, after it failed to pay City Developments Ltd (CDL) over S$2 million in rent as at February 2024. The space has since been taken over by CDL’s subsidiary City Serviced Offices.

WeWork has given up about 60,000 sq ft of space in Manulife Tower at 8 Cross Street, Bloomberg reported in November. It will not be renewing its co-working space at UE Square in the Clarke Quay area when the lease expires in 2025. 

JustCo surrendered its premises in Asia Square Tower 2 earlier this year after its lease expired. It is expected to vacate Samsung Hub by the end of the year. Both locations were opened more than 10 years ago.   

In February, the co-working operator, which counts GIC and Frasers Property among its investors, opened an outlet in Hong Leong Building. Its newest location in Singapore at 108 Robinson Road opened in April. 

Since 2023, The Executive Centre has been operating The Exchange, a 22,000 sq ft space across two floors in Singapore Land Tower. It will be opening a new centre at Ocean Financial Centre in March 2025.

Sheena Goh, head of sales of The Work Project, which is majority owned by CapitaLand Development, said that instead of opening new locations, the co-working operator has been focusing on growing within existing buildings. 

She said: “This year, we added a floor each in Capital Tower and CapitaGreen. The former is now sold out and the latter is 95 per cent occupied.” 

Tridiana Ong, Colliers Singapore’s executive director and head of tenant representation, said that tighter margins, resulting from increased direct and indirect competition, have led some operators to adopt an asset-light strategy. 

However, the expansion of co-working operators through management contracts is in its relatively early stages of acceptance in the local market, she added. 

Cushman’s Wong said: “Some of the major landlords in Singapore are also active in the co-working space, and have either partnered with co-working operators or have developed their own co-working spaces.” 

Savills’ Cheong said: “Landlords are trying to be innovative to meet tenants’ flex space needs. Today, tenants have greater requirements for collaborative work spaces, but given the challenging business conditions, they may not wish to risk it by taking on too much office space.”

He added: “The landlord therefore steps in to provide that add-on service to their tenants. This will enhance the attractiveness of the building to attract or retain tenants.” 

Such spaces have an advantage of being located in the same building as the tenants’ main office, making it accessible for staff.

At GuocoLand’s Network Hub, there are two large, fully fitted-out private office suites which can be leased on a short to medium-term basis to tenants at Guoco Midtown, as well as third-party clients. 

One of the swing spaces is 4,400 sq ft and the other is 2,700 sq ft. In total, they can accommodate almost 100 people.

One of GuocoLand’s existing tenants is moving into the space in December as part of expansion plans. The tenant, a multinational company, has committed to lease it for over a year. The other private office suite has also received strong interest, said Valerie Wong, GuocoLand’s managing director of asset management. 

She said: “We’ve had short-term users before as part of their transition into a longer-term traditional office space within Guoco Midtown. Having these swing spaces, meeting rooms and the complimentary lounge enable us to work with our tenants on various permutations of interim solutions for their real estate needs.This will help us in our long-term tenant retention strategy across our office portfolio.”

Yvonne Lim, managing director of South-east Asia at The Executive Centre, said: “We believe that strong relationships with landlords are crucial for the success of flexible and co-working operators. Partnerships like ours with SingLand enable us to secure prime locations and provide our clients with high-quality spaces that meet their evolving needs.”

Junny Lee, founder and chief executive of The Work Project, said: “There are a lot of synergies created when operators and landlords work together.

“The entire platform becomes much more versatile (and) able to service occupiers throughout the entire lifecycle.” 

He cited the example of how Tencent had a “much smaller” presence at CapitaSpring in 2021, but this has now grown to a fully managed 56,000 sq ft headquarter office at CapitaSky.

Chua Yang Liang, head of research and consultancy for South-east Asia at JLL, said: “Despite some short-term challenges, the flexible workspace market in Singapore appears stable. It’s expected to perform well in the coming years supported by limited new supply pipeline and anticipated economic growth that may encourage business expansion and hiring.”

The Work Project’s Goh said: “Co-working options remain attractive to occupiers as (they) provide an excellent solution due to the flexible nature of commitment term, fully furnished private offices with communal facilities, and the ease of right-sizing with low upfront cost.” 

Looking ahead, JustCo’s chief executive officer and founder Kong Wan Sing noted: “As the workspace evolves, we are confident the co-working sector will continue to play a vital role in fostering innovation and unlocking new business growth.”