The co-working trend is taking off in China. Starting in the second half of last year, more than one hundred operators have been seeking either office or retail space to set-up co-working spaces in China’s Tier 1 and Tier 1.5 cities. Even some traditional corporate occupiers are beginning to embrace the co-working trend by changing their workplace strategies. What is fuelling this growing popularity of co-working in China?

Four fundamental changes have led to the co-working boom:

• The millennial generation will soon become the majority in China’s workforce, who desires a more interactive and tech-enabled working environment (see Figure 1).
• The pool of co-working’s target tenants, small-scale start-ups and freelancers, is growing under the central government’s support for entrepreneurship.
• Co-working concepts align well with China’s undergoing shift towards the sharing economy.
• Advanced technology enables co-working spaces to offer various added values.

Figure 1: Characteristics of the millennial generation

In addition to allowing more flexibility in terms of size and duration of space commitments – which is similar to the more traditional business centres – the key benefit of the new co-working brands is their value-added. Co-working spaces focus on creating social, interactive, and open working environments. Their standard features usually include social apps for members to easily interact with each other, a large common space to mingle, and social activities such as outings. Such added-values differentiate co-working spaces from the more traditional business centres.

The potential for co-working spaces to generate value through more interaction between people and to save costs by sharing resources have inspired corporate tenants to start thinking about how to incorporate co-working elements into their workplace strategies. In addition to first-mover high-tech and creative industries, even some professional services firms are making co-working solutions a priority in new office space. For example, a large multinational consulting firm relocated to new office space in Shanghai’s core CBD area early this year, adding a “work café & open corner” of around 700 sqm (15% of its total leased area). This area employs a typical co-working space design with exposed ceilings along with cate-style tables and benches and no dedicated seating arrangements.

What does this new trend mean for landlords and developers? Pro-entrepreneurship government policy and market forces combined with changing workforce demographics will allow the co-working industry to take root in China, particularly in Tier 1 cities. Co-working operators that provide well-thought-out co-working features that add greatest value for tenants are likely to be successful. Landlords could position co-working space as an amenity for office tenants, or even build up their own co-working brands (SOHO China created a new co-working brand “3Q”) to meet this emerging demand. Finally, due to changes in workplace strategy for many corporate tenants, developers should reconsider their standard handover conditions.

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