Coworking facilities struggle through restrictions

With the pandemic complicating the movement and forcing many employees to work from home more often, coworking space operators in Vietnam are taking advantage of this time to improve their interiors and services, while trying to continue their expansion.

Coworking space providers like WeWork face significant losses during the pandemic. Photo VIR: Le Toan

The pandemic has significantly impacted the real estate market and coworking spaces are suffering the consequences of the crisis on their occupancy rates and demand.

Many operators’ expansion plans have been put on hold as they focus instead on building customer loyalty, supporting affected businesses and improving their service offerings, according to a report released last month on coworking and flexible workspaces in Vietnam 2020-2021 produced by Acclime Vietnam and supported by Cushman & Wakefield.

Currently, WeWork is the dominant global supplier in the market and has a presence in Southeast Asian countries like Vietnam, Singapore, Malaysia, and Thailand.

Last year, WeWork’s plan to expand into Vietnam failed when it opened a new space at Lim Tower and closed its station in the Sonatus Building, both located in central Ho Chi Minh City.

A series of other small-scale domestic coworking spaces were closed for several months in 2020. Among these were MindX, Dream Station, Le Plateau, Rehobooth and GBook. Many more have had to reduce their opening hours and cancel all public events.

Due to the pandemic, several flexible office operators are postponing the opening of their new locations and awaiting stabilization in the region.

Due to limited availability at major hubs, owners of flexible workspaces must find solutions that will allow them to continue to expand and grow, while creating an effective market strategy to compete for available locations.

Adam Henick, co-founder of Current Real Estate Advisors, said that once the pandemic is over, investors who have invested capital in chains of coworking spaces will surely need to re-evaluate their business models.

According to Henick, what coworking space chains need to do is reduce flexible work seats and increase the number of dedicated desks, and further extend the rental period in the tenants contract to improve performance. proportion of fixed income streams.

To do this, coworking chains need to adjust their business models and focus on attracting larger, more stable businesses.

On the right track

The entire market is struggling, but entrenched providers are still trying to take advantage of the market downturn, looking to acquire smaller, pressurized coworking spaces.

While acknowledging that the global health crisis is seriously affecting the real estate market and the economy, Toong, one of the first and largest chains of coworking spaces in Vietnam, Laos and Cambodia, refused to back down.

During the difficult period of the first half of 2021, Toong still put new projects into operation. In March, Toong’s first resort in a strategic cooperation project with Wink Hotels was also officially launched at 75 Nguyen Binh Khiem, District 1.

Currently, Toong is rushing to complete and prepare for the opening of a new Republic Plaza building in Cong Hoa Street, also in Ho Chi Minh City.

In addition to leading the final negotiations to be able to build new locations in Hanoi and Dalat, Toong continues to cooperate with Wink Hotels to implement three integrated workspace projects in new generation hotels in Danang and Can Tho.

“The pandemic on the one hand has slowed down our activities but on the other hand it offers us more favorable conditions to deal with owners for the rental of space or co-investment in new stations,” said Duong. Do, co-founder of Toong.

Meanwhile, Hoang Linh, co-founder and CEO of cirCO, said what makes the coworking space different from the traditional office is flexibility, cost savings and community connectivity.

“COVID-19 is both a challenge and an opportunity for this model to demonstrate its superiority over the traditional desktop,” Linh shared. “For businesses during this time, reducing office size makes financial sense. With many advantages of flexible offices, many companies are planning to move to flexible offices in the near future.

Flexible offices help businesses reduce initial capital costs, Linh added. “It also gives them a key factor in increasing the quality of the work environment for their employees, attracting and retaining the right employees for their business. “

Some other operators have emphasized growth as a key strategy based on strong customer demand.

Dreamplex, for example, continues to strengthen its market position with a new location in Thao Dien in the town of Thu Duc. It is expected to open three other sites at the end of 2021 in Districts 1 and 4, as well as Thu Duc.

Meanwhile, Kafnu and Compass have stepped up competition in Vietnam with massive investments in Category A locations in Ho Chi Minh City and Hanoi and with expansion plans ready to take off as soon as pandemic signs of recovery appear. visible.

Room for growth

According to Cushman & Wakefield, the Vietnamese flexible office space industry in 2020 occupied approximately 160,000 m² of space in Class A and B buildings in the two office hub cities, or less than 4% of the total stock of category A and B. In 2020 and 2021, the number of coworking and serviced offices in Vietnam is expected to exceed this amount.

Besides local suppliers such as Dreamplex and Toong who have already managed to aggregate their brand with local communities, foreign brands such as Regus, The Executive Center, WeWork, UPGen and Circo represent a growing share of the market with several locations in the areas. power plants in Ho Chi Minh City and Hanoi and future projects on the table.

In addition, global vendors such as The Hive and Compass offices hope to expand their locations in Vietnam in the coming years.

According to Cushman & Wakefield research in 2019, WeWork was the largest flexible office provider in Ho Chi Minh City with a total area of ​​less than 19,200 square meters. This year, with WeWork having closed a 6,800m² site, it is estimated that the consistent expansion strategy will position Dreamplex to take over at the top, as it will increase its total footprint to nearly 18,000m² with three new Locations .

According to the Acclime Vietnam report, Vietnamese coworking spaces are one of the most dynamic and innovative markets, with significant potential for growth and profitability. Flexible workspaces are seen as a fundamental trend in the real estate industry and demand will have a consistent growth trajectory, in line with systemic changes in the way businesses and their employees embrace digitization, innovative working models and a more flexible and versatile approach to work, says the report.

Coworking Resources also announced that Vietnam is in the top 50 countries in the world in terms of growth in coworking spaces per capita. However, the number of coworking spaces in the market is still considerably lower than in Singapore, Hong Kong and Malaysia. Ho Chi Minh City ranked 41st out of the top 50 cities in the world in 2019/2020, where every 47.5 days a new coworking space was created.

In a report released by IDC in August 2020, it was noted that adoption by local businesses to global businesses continues to increase locally, and 80% of Vietnamese businesses plan to adopt coworking spaces within 1 to Next 3 years, more than the regional average. .

David Jackson – CEO, Colliers Vietnam

The first risk is to lose a certain number of tenants. Since the tenants of coworking spaces are mostly small to medium-sized businesses and startups, the stability is not too high. With the impact of the pandemic, it is not excluded that some companies in this group will have to reduce their operations, reduce their workforce, or even stop working.

Then, during the social distancing period, many companies require employees to work from home. It also directly affects the income of coworking spaces if their tenants rent the office on a monthly basis.

To retain tenants, many investors in coworking spaces will need to reduce the rent, which can be quite high, ranging from 20 to 40 percent.

The constantly increasing supply in recent years has also made the level of competition in this segment more fierce, forcing companies managing coworking spaces to constantly seek operational or marketing solutions to gain a competitive advantage.

Because the types and locations of coworking spaces are more diverse, the terms of the contract must also be much more flexible, creating more pressure on operators.

Vlad Savin – Business Development Manager, Acclime Vietnam

The current resurgence of COVID-19 in Vietnam may pose challenges for the coworking and flexible workspace segment, forcing operators to re-evaluate their strategies and adopt a lean and flexible approach in the period to come to the end. end of 2021.

If the situation continues, operators who adopt a standard coworking model will be the first to suffer, as their tenants represented by individuals, freelancers, digital nomads and small businesses will prefer to work from home, or will not be able to come to the market. office.

At the same time, authorities have become stricter in granting visa extensions to foreigners, which has prompted many people who used coworking spaces for their remote work schedule to leave the country.

Small coworking spaces that rely on people working remotely will certainly have a hard time keeping them engaged and reducing their offers may no longer be a valid solution, given that in 2020 the fees are already in place. decreased from 7 to 8% on average.

Flexible workspace operators who integrate a mixed model of coworking and traditional space, focusing on larger companies and longer leases, can ride this latest wave. Their expansion plans may be delayed, however, and their projections may not match the current reality of potential clients, who are in part represented by foreign investors, small businesses and multinationals, who may also choose to delay their expansion plans. ‘expansion.

Source: VIR

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