Supported by robust demand from occupiers, the flexible workspace sector witnessed tremendous growth in Singapore, according to Colliers’ latest research report which examines the growth and outlook of the flexible workspace sector in Singapore.
Accounting for the bulk of the net office absorption in 2017-2018, flexible workspace in Singapore tripled since 2015 to become one of the top six occupier sectors, accounting for 5% of CBD Grade A space. It now accounts for 3.7 million sq ft of net lettable area (NLA) of commercial space island-wide – more than trebled from the 1.2 million sq ft in 2015, according to Colliers Research.
Colliers forecasts the sector to grow 24% and 15% by net lettable area occupied in 2019 and 2020 respectively on continued pace of adoption, partially limited by the tighter availability of space.
“Singapore is considered one of the most mature markets in Asia for flexible workspace. In the last three years, the sector has seen stellar growth, at a compound annual growth rate (CAGR) of 36% by NLA. We believe it will continue to advance and expand, given the still-low penetration rate of 5%. That said, given the tight vacancy in the CBD, we would expect flexible workspace operators to increasingly look at alternative locations outside the city,” said Tricia Song, Head of Research for Singapore at Colliers International.
Data tracked by Colliers Research showed that 83% of the flexible workspace stock is located in the central business district (CBD), with 12% in the city fringe and 5% in suburban areas. Within the CBD, flexible workspace is most concentrated in the Raffles Place/New Downtown micro-market (52%) – boosted by the lease of 200,000 sq ft of space at 21 Collyer Quay (HSBC Building) by WeWork.
The top seven flexible workspace operators now hold 65% of the market share, with the top three – WeWork, IWG, and JustGroup – holding 51% of the enlarged pie. This reflects consolidation in the industry, as the bigger operators have been scaling up their portfolios aggressively, while some of the smaller operators with no economies of scale were either acquired or squeezed out. Based on Colliers’ research, most of the closures came from small-sized, single-space operators, with an average floor space of 7,500 sq ft.
The sector is set to see more growth and Colliers Research has identified three key trends that would shape the flexible workspace sector in Singapore: continued consolidation; expansion into retail/hotel space; and increased collaboration between landlords and operators.