Flexible office spaces the next big thing in property sector

MANILA, Philippines - The country’s growing attractiveness to multinational corporations and the influx of business start-ups are giving rise to flexible office spaces, touted as the next big thing in the office property market.

The concept of flexible office space, although relatively new to the Philippines has been fast gaining popularity in the last three years.

Its growth, however, is seen reaching new heights as increasing demand for flexible office spaces is expected to play a significant role in the expansion of the Metro Manila office sector this year, according to property consultancy firm Colliers International.

“The growth is fueled by the foreign investors, local freelancers and rising start-ups. For the millennial start-up entrepreneurs and self-employed workers, flexible work spaces provide an attractive proposition because of their modern working environments and the opportunity to collaborate and exchange ideas.

For foreign investors and multinational corporations, it is a way for them to start out small and test out the viability of their businesses before proceeding to scale their operations here,” Colliers International Philippines director for office services Dom Fredrick Andaya said.

As of end-2016, Colliers said there are already 50 flexible workspace centers in Metro Manila alone, occupying an estimated area of 200,000 square meters.

The industry boasts of high occupancy rates averaging at 80 percent, with several major providers having almost 100 percent occupancy in key sites, it added.

The property consultancy firm said growth is driven by both old and new businesses, which use these spaces to suit their respective business needs.

According to Colliers executive director Liam McCartan, flexible workspace in the Philippine market is generally classified into three groups: serviced offices, hosted services and co-working.

He said serviced offices are preferred by multinational corporations looking to incubate temporarily.

Large multinationals use these spaces before executing full-blown expansions, providing them with flexibility and convenience, as well as giving them time to adjust their business operations and strategy to the local market.

Hosted services firms, on the other hand, are preferred by business process outsourcing companies where non-core processes such as IT, facilities management, HR staffing and back-office operations are provided.

Co-working spaces, meanwhile, are favored by start-ups and freelancers. Colliers said this type of spaces continue to grow given the influx of start-ups and freelancers and show no signs of slowing down with the number of freelancers currently estimated at 1.3 million.

“Interestingly, the co-working segment is also growing in popularity in Metro Manila with smaller firms such as Launchpad, Co-Lab, BitSpace and VOffice.

These co-working firms offer a more private alternative to start-ups and freelancers who would otherwise work in coffee shops,” McCartan said.The property consultancy firm, however, noted that flexible work spaces create both benefits and challenges to landlords.

“These work spaces create a potential to reduce the length of vacancies. On the other hand, the industry’s dynamic nature requires them to move quickly. The market is competitive in terms of services, packages and rates,” Colliers said.Nonetheless, growth potential for the sector remains very bright.