31 JUL 2018
Hong Kong has long been home to the priciest real estate in the world. In a city where land is in short supply, are flexible, shared spaces a way for people to work and live more effectively with each other?
In a recent report by CBRE, ‘Shared real estate in Hong Kong 2018’, Head of Research for CBRE Hong Kong, Southern China and Taiwan, Mr Marcos Chan MRICS, looks into the shared-space trend in real estate and why high costs are driving people to share resources.
As a densely populated international gateway city, Hong Kong’s property prices and rents frequently top the global rankings. In recent years, we have seen the popularity of activity-based working grow, which is supported by the application of new technology and a stronger emphasis on collaboration. While subdivided flats and serviced offices have offered a solution for decades, the concept has since evolved; we are witnessing old ideas reappearing in new forms. Individuals, start-ups and large companies are now demanding flexible workspaces and other shared real estate.
The evolution of the serviced-office concept has flourished with the growth of the co-working sector; co-working operators are breaking down the walls that are usually built to separate tenants. Those signing up for space at co-working centres benefit from being part of a professional business community. The break-out spaces, coffee stations, sofa areas and even swimming pools encourage people to meet, connect and create business opportunities. Co-working spaces also allow tenants to enjoy more flexible lease terms and access innovative business infrastructure without requiring capital expenditure.
Hong Kong has seen the rapid expansion of co-working centres since 2016, when some international co-working brands started to set foot in Hong Kong — it has proliferated since then. According to CBRE data, there was around 880,000 square feet of co-working office space in Hong Kong by the end of 2016. The number is expected to increase to 1.6 million square feet by the end of 2018, with 51% of them being in Grade A offices.
Increasingly, landlords have come to realise the merit of having co-working operators in their portfolio. These operators usually offer event space and more technologically-advanced amenities to enable the efficient use of space. All these can help improve a property’s image and bring additional event space to other occupiers.
Co-living spaces, however, are on a different development curve. Co-living units refer to affordable, subdivided flats where residents share amenities, such as a kitchen and bathroom. While they may offer a cost-saving solution to millennials and lower income groups, they are not a long-term or sustainable answer.
Tenants in co-living spaces are mainly between 20–29 years old, but this pool of 931,000 young professionals will shrink by 211,000 over the next decade. This will jeopardise market demand and supply for co-living space. Meanwhile, as the Hong Kong Government has proposed new housing policies to stabilise the residential market, citizens will be more likely to find affordable houses soon, making these co-living flats less appealing than they are now.
Shared real estate is about cost saving and better utilisation of limited physical space, creating new possibilities from fixed-floor plates. Hong Kong has long been hailed as a city of innovation, and it will need to continue to transform and evolve to address its residents’ needs.
RICS regularly conduct market surveys to gain industry insights into residential and commercial property markets globally. Our market surveys are leading indicators of conditions in these markets, but we need your help to generate large samples to improve the validity of our data.