An offshoot from the work-from-anywhere scheme being implemented by firms is the rise in the demand for co-working spaces. This is an office sub-segment that suffered substantially at the height of the pandemic due to strict physical and social distancing measures implemented by the government and private firms.
Vacancy in the flexible space sub-segment spiked to about 40% in 2020. But interestingly, the demand for these spaces is starting to grow again. What developers have been doing is that they have been very strategic with their expansion, locating in-between residential communities and bustling business districts. As of Q1 2024, the flexible workspace subsegment’s vacancy improved to 20.4%
New office space arrangement under the newer, better normal
Due to the new ways of working, there is an increasing demand for flexible work environments. Occupiers are seeking cost effective and scalable solutions. Having a flexible space operator in buildings allows landlords to attract a wide range of tenants including startups, freelancers and satellite offices.
Flexible workspace operators are seizing the demand, expanding within and outside Metro Manila. Over the past few months we have seen the aggressive expansion of IWG, KMC Solutions, WeRemote, Figari, and other operators.
But some developers have started to push the envelope further and have opened facilities within industrial parks, retail spaces, and even within condominium towers. This only indicates that possibilities for the sector are limitless as companies and employees continue to work and operate under a newer and better normal.
Flexible workspace operators enhance value of the property because they bring in specialized expertise in managing and optimizing workspace utilization. Flexible workspace operators invest heavily in design, efficient and state-of-the-art amenities, which created a more appealing and functional environment.
Collaborative spaces in condominium towers
Colliers recommends that developers upgrade their projects’ amenities and concierge services to differentiate in the pre-selling residential market.
Colliers Philippines’ Q3 2022 Residential Survey result showed that about 83% of respondents prefer condominium projects that offer good ventilation as well as green and open spaces, while 16% prefer having a smart home system. Colliers believes that developers should consider incorporating amenities that will allow residents to work-from home such as co-working spaces, function rooms and business lounges. Developers should incorporate these features even for projects outside of Metro Manila.
Good ventilation and large open/green spaces are a major consideration of our respondents when buying a residential unit. Having co-working spaces and business amenities is also important especially for investors that are still working from home. Colliers believes that developers should consider adding these features to their developments moving forward. The results of our poll also indicate the shift in consumer preferences brought about by Covid. Developers should highlight these features as they try to entice more discerning buyers. Having these features is also a great way of differentiating products in the pre-selling market.
Upgrading co-living amenities
In our view, co-living will be a popular option among employers and their workers in Metro Manila beyond 2024 especially with the return of on-site operations and Metro Manila’s traffic reverting to pre-pandemic levels. Colliers recommends co-living operators to upgrade their services to lure more tenants to their facilities such as free housekeeping and laundry services, and stable Internet connection. Selected operators also bundle flexible workspaces with a free stay in a co-living facility.
Flexible workspace in malls and/or near transit-oriented developments
From 2022 to 2024, we see the completion of more regional to super-regional malls in Metro Manila with gross leasable area (GLA) of 50,000 sq metres and above (538,000 sq feet and above). Colliers encourages flexible workspace operators to consider occupying space especially in transit-oriented mall developments especially now that footfall is reverting to and even surpassing pre-covid levels. Co-working space operators may also partner with retail establishments such as gyms, restaurants and cinemas to add value to their services.
Integrating workspaces into industrial parks
We strongly recommend that industrial park developers incorporate industrial spaces and facilities within their township projects. For instance, Aboitiz InfraCapital’s LIMA Estate features an industrial park, LIMA Technology Center, a residential subdivision (The Villages at Lipa) and a co-working facility, The Satellite. The township will also feature hotels, dormitories and commercial areas. Other industrial parks located inside integrated communities include Pueblo de Oro’s Light Industry and Science Park IV in The Townscapes Malvar in Batangas and Filinvest Land’s Filinvest Innovation Park in Ciudad de Calamba in Laguna. Interestingly, some developers are also exploring the viability of establishing co-working facilities within their own industrial parks which will cater to outside employees.
Flexi space in new hotels as we expect record-high new supply
In 2024, we expect about 5,120 new hotel rooms in Metro Manila, an all-time high. Colliers estimates that about 40% of the new hotel supply will come from foreign brands. The Bay Area, meanwhile, will cover nearly half of the new hotel rooms. In our view, now is a good opportunity for independent flexible space operators to explore partnering with hotels to offer co-working spaces. This should be welcomed especially by long-staying business travelers that are in the Philippines to conduct due diligence. These collaborative spaces should complement hotels’ meetings, incentives, conferences, and exhibitions (MICE) facilities.
