Earlier this month, JLL examined the rise of the co-working culture in China and, in Singapore, co-working space has recently become the talk of the town. This is because of the reported Collective Works and CapitaLand joint venture that provides first-of-its-kind “premium co-working space” in Capital Tower – a Grade A office building in Singapore’s CBD. Currently, co-working space in Singapore is typically located outside the CBD. This joint venture is a break from tradition, sparking speculation and debate that co-working space could become the next demand driver, especially in the light of the large upcoming office supply of 5.4 million sq ft across the island over the next three years.

The very first co-working space was set up in 2009. To date, there are more than 30 co-working offices with a real estate footprint estimated at 250,000 sq ft island-wide, of which about 20% are located in the CBD. The growth of co-working space has been increasing steadily and we could expect more entrants into the CBD given the upcoming launches in Capital Tower and OUE Downtown 2.

The typical tenant profile in a co-working space is entrepreneurs in the form of start-ups and freelancers. Large corporations typically do not use co-working space. Taking this into account, we think that although the growth of co-working space in Singapore is still in its infancy stage, it is unlikely to become a main demand driver in the short-term.

Firstly, demand for work space by start-ups in Singapore is relatively small. Based on a study by the National University of Singapore Enterprise, approximately 330,000 people (comprising 9.2% of the 3.6 million-strong workforce) were employed by the start-up sector in 2014. Besides, this figure is likely to grow at a gradual rate – according to a 2014 survey by the Global Entrepreneurship Monitor, a leading researcher into global entrepreneurship trends, 9 out of 100 people intended to start a business within the next three years in Singapore, compared to 20 in the rest of Asia Pacific. These figures suggest that the demand for co-working space could be fairly limited, at least in the short-term.

Furthermore, the typical floor space leased by small-to-medium size co-working space operators ranges from 2,000 to 5,000 sq ft as their tenants usually have a smaller team size and may not require daily use of the office space. Thus, it could be challenging for these operators to lease large floor areas from landlords unless there is substantial demand.

There is potential for a vibrant co-working space culture in Singapore and with the right nourishment, it could grow beyond its infancy phase in the future. This growth is likely to be gradual given the relatively smaller floor plate required for co-working space.

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