It has been 3 years since the first outbreak of COVID. In these 3 years, people changed their perspectives towards what a working space should be. Previously, people generally believed that a working space should be separated from home, and people need to “go out” to work. So the working space needed to host all of the staff at the same time (other than those taking shifts). Under COVID, more and more companies are inclined to let their staff work from home. As a result, the demand for a working space is decreasing naturally. And to a greater extent, COVID changed the equilibrium of the co-working space industry.
Work From Home
“Work From Home (WFH)” in fact has been pretty common among those western countries for more than a decade, especially in those Northern European countries which can be covered by snow for several months in a year. To them, working from home is indifference from working in the office. Nevertheless, for those who are living in metropolitan cities, work from home has not been a common practice since people are so used to seeing each other face to face. A lot of the large corporations (before COVID) were trying to advocate for a more flexible working arrangement (part of the time work from home and part of the time work in the office) has not been successful due to this reason.
Change In Large Corporations
Under COVID, all of a sudden, the staff of large corporations are forced to work from home for a certain period of time. They started to get used to this kind of new norm. Those so-called “problems” or “challenges” before are no longer an issue. This also triggered the large corporations (especially the banks, insurance companies and asset management companies in Hong Kong) to reconsider what they planned a few years back. When the occupancy and utilization of their office space is low, they plan to shrink the office space and let some of their staff to work from home or take rotations. Within the smaller office space, it requires some kind of flexible arrangements as well – namely putting up more meeting rooms and “collaboration areas” for project discussions, and keeping a small portion for work desks. Some of the work desks may even need to be shared as well. Does this look pretty familiar? Yes it is somewhat like a co-working space. You can imagine that this is a “private” co-working space without any outsiders coming in.
Collaborating With Large Corporations
To many large corporations, changing the way of office design is just the first step. Next, they will collaborate with the co-working spaces to turn the work space into a more flexible tool to facilitate their business needs. If they need some more space in a particular year, they can simply rent 1 or 2 more floors from the co-working space. This is so much more agile than compared to a fixed tenor of 3 or 6 years with the landlord. Some co-working spaces with larger scale (such as The Executive Centre) spot on this opportunity. They enlarged their footprints in Hong Kong and many other CBD in the main cities around the globe in the past few years.
Industry Being Polarized
Actually, the impact of COVID towards the co-working space industry is a double-sided sword. On one hand, it pushes some large corporations to find more flexible solutions from the large-scale co-working spaces. On the other hand, it also pushes some smaller market players down the cliff. Why? Just imagine that under COVID, a lot of small companies or start-ups cannot survive. These are the typical tenants of small co-working spaces. They either surrender the space and work from home, or shut down the operations. For the smaller co-working spaces, regular rental income is a key source of cash flow, which they use to pay their own rent. Without this cash flow, a lot of the financially weaker ones are driven out of the market. This makes the industry slightly more sensible and calm, compared to a few years ago when everyone is striving to open a co-working space in Hong Kong.
A New Industry Developed
Post-COVID, all those survivors are warriors. Among those warriors, how a co-working space can stand out among the others is really depending on the service they provide. For example, some of them will provide 24×7 access, free drinks, outdoor area or even some complimentary professional services like bookkeeping, auditing and legal advice etc. To the end users, how could they rank the service providers among the 100+ co-working spaces in Hong Kong? This triggers the birth of a new industry: co-working space agencies (such as FlexFinder). Basically it works like a property agent, but they do not charge the end users. They will compare different service providers and then make a recommendation to the end users. But remember, if you want to use an agency, please check if they are only covering a few co-working spaces. If so, it is not as independent as what you might have thought.