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WeWork Tower 535
Has Hong Kong hit peak co-working?
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ong Kong’s co-working sector may have already peaked with the booming industry now seeing some operators close shop seemingly as fast as they opened. The latest casualty is China-based Kr Space which surrendered its lease at One Hennessy in Wan Chai where it would have occupied seven floors spanning 83,000 sqft. “Most of co-working space operators have yet to be profitable whilst initial capex requirement is relatively
demanding. We do not rule out the possibility of some industry consolidation in future if funding becomes a concern,” Jeff Yau, CFA at DBS Research said in a report. That hasn’t stopped most flexible space operators from trying to capture the elusive Hong Kong market. WeWork is committing to another 150,000 sqft of office space at Gateway in Tsim Sha Tsui, which comes on the heels of an earlier agreement with Swire Properties to be the sole tenant of Generali
Tower near Pacific Place Three in Wan Chai where it will occupy 100,000 sqft of office space at newly built H Code in Central. WeWork is also taking up two floors at The Quayside, Kwun Tong. WeWork will also be bringing its “go” concept to Hong Kong following its successful trial in Shanghai. This membership plan charges users by the minute, placing it firmly in the space for a seat for an hour or so that Starbucks has profited so well from. Perhaps Hong Kongers will decide it’s just as good to take a lift up to WeWork for a caffeine pick-me-up instead of the local coffee shop. But it’s not all exit and leave. Players are also growing their footprint with theDesk set to operate its fifth outlet in the Bonham Trade Centre in Sheung Wan by Q4. Sunlight REIT is tasked to carry out the enhancement works in Bonham Trade Centre which will be rebranded as Strand 50. In January, Spaces unveiled its fourth and largest location in 81 Des Veoux Road in the form of a 20-storey hub spanning 77,000 sqft. Room to grow There are over 50 flexible workspace operators spread across 80 locations in Hong Kong to cover more than 1 million sqft of land area, property consulting firm JLL said in a June 2018 report. It is unsurprising that such setups have gained momentum in pricey Hong Kong which is no stranger to sky-high property prices. A report from CBRE ranks Central as the world’s priciest office market for the third straight year in 2018 where it beat out the likes of New York, Paris and London.
THE CHARTIST: LAND-STARVED HONG KONG IS NOW RUNNING OUT OF OFFICE SPACE The government is estimated to have enough land that could deliver about 10 years’ worth of commercial office supply in yet another sign of Hong Kong’s chronic land shortage forming the source of its perennial property woes, according to JLL. This translates to around 20.1 million sq ft of potential office space that could be delivered from future government land sales (GLS) with the majority of office space (14.7 million sqft) located in Kowloon and Hong Kong Island (5.4 million sqft). Grade A office space has increasingly become reliant on GLS rather than the redevelopment of privately-held land, with estimates that the former could account for over 60% of Grade A office supply between 2018 and 2022 from a little over 30% in 20082017. JLL predicts that all Grade A offices set for completion in 2022 are from GLS.
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HONG KONG BUSINESS | JULY 2019
Office supply by development type
Source: JLL
Office rental comparison across APAC
Source: JLL