- Both COVID-19 and the sociopolitical landscape have affected the real estate Market in Hong Kong
- There is a rising trend of landlords who turn their properties into co-working spaces
- Furniture rental can play a large part in furnishing property space
The effects of the COVID-19 pandemic have affected almost every industry in the workplace. Real estate and property management in Hong Kong specifically have also taken a downturn, with tenants and retailers struggling to pay rent, leaving landlords with a significant amount of unoccupied space. To help combat this, some opportunistic landlords have turned to the co-working space sector, yielding a fair number of benefits and results.
According to The Diplomat, housing foreclosures in Hong Kong have risen by 54% in the past few months. The commercial property market has also seen a 30% drop in the past year. Local landlords are struggling with the combined effects of COVID-19 and the sociopolitical unrest in the city.
At a time when it may be more difficult than usual to find tenants, the co-working space industry has opened up a world of possibilities and opportunities for landlords. Unused space is every property owner’s nightmare, and practically a drain of resources. Here are just a few reasons why turning property into a co-working space can be beneficial to landlords.
1. It’s a source of rental revenue
The main advantage of this concept is the source of income. Landlords who place furnished properties on the market can typically charge anywhere from 15-40% higher in rents, depending on the location of the property and the duration of the lease. This is particularly apt for the co-working space business model, which serves businesses and tenants who are, more often than not, looking for fully furnished spaces for short durations.
While the initial investment of furnishing a space with equipment and facilities may be steep, companies like Føerni offer rental and flexible payment plans, with a full office furniture fit out option so landlords don’t have to worry about anything.
Furnishing your space will not only help you cater to a wider range of customers, but will also benefit your tenants as well as increase your property’s appeal and demand.
Beyond the numbers and figures, a property can gain value as a co-working space by fostering a sense of community, providing its customers with flexibility, and opening up possibilities for networking and connections. If you’re able to turn your space into a place that your customers are excited and happy about, then that value in itself is immeasurable in worth.
2. It’s the best time to penetrate the co-working space sector
In the past year, some major players in the co-working industry have scaled back their operations, making this an ideal time for landlords to penetrate the market.
The pandemic also positively affects the market in that companies have had to reimagine their traditional office spaces. Small companies and start-ups don’t generally want to commit to long-term leases and agreements, and larger companies are also relinquishing the idea of a conventional workplace in lieu of a more flexible space. Pair that with the city’s reputation as a business hub, and the time seems right to grab the opportunity.
3. It's a proven concept
The concept of landlords turning their properties into co-working spaces isn’t a foreign one. Swire Properties pioneered a co-working space in Taikoo Place in 2017. Hong Kong Business provides other examples of operators citing Mustard Seed, which was launched in mid-2017, and Eaton Club, which now has several locations across the city.
South China Morning Post also provides proof of this tried concept, referencing the landlord of V-point, who opened up V-co, the landlord of China Resources Building in Wan Chai operating an independent co-working space, as well as Henderson Land who revamped their property to operate a co-working space.
Another option is to partner with successful co-working spaces instead of venturing into the sector independently. South China Morning Post says, “An example of this is a joint venture formed by a local developer with a UK-based co-working space operator to run one of the spaces surrendered by WeWork.”
This trend of turning properties into co-working spaces is not simply a passing fad, and merits more than just a few thoughts. Landlords should consider the growth of the co-working space industry – given the abundant opportunities that will be available once business activity resumes its normal pace – as well as the current flexible work space direction offices seem to be taking.