New tenants may opt for other co-working space providers in Singapore until there is more clarity about WeWork’s future, one analyst says.
SINGAPORE: Although WeWork has filed for bankruptcy in the United States, demand for co-working spaces remains strong in Singapore, analysts told CNA.
The SoftBank Group-backed startup, which sought US bankruptcy protection on Monday (Nov 6), said it has entered into a restructuring agreement with key stakeholders to drastically reduce its existing funded debt. It also intends to file similar proceedings in Canada.
The company’s locations outside of the US and Canada, as well as its franchisees around the world, are not affected by these proceedings, it added.
A spokesman for WeWork Singapore said it is “business as usual” and that customers can continue using its 14 offices here.
WeWork first opened its doors in Singapore in 2017. Last September, it opened its 14th outlet in the country at 21 Collyer Quay near Raffles Place – WeWork’s largest location in Asia Pacific at over 220,000 sq ft.
Noting that WeWork Singapore’s operations are not likely to be affected by the bankruptcy, real estate analysts CNA spoke to also highlighted that the demand for co-working spaces in Singapore is “very strong”.
Some co-working operators are seeing occupancy rates between 90 and 100 per cent, and are looking to expand especially in the city centre, said Huttons Asia’s senior director for data analytics Lee Sze Teck.
Mr Alan Cheong, executive director of research and consultancy at Savills, highlighted that furnished spaces occupied by WeWork would find “ready takers” to fill the spot. These may be co-working entities formed by building owners where WeWork is located or competitors stepping up as substitute operators.
Only unfitted office space without furnishing and locations that are performing below the margin are likely to be negatively affected by the bankruptcy.
“Co-working has a place in the new workplace arrangement. With WeWork out of the picture, the competition is reduced, making it easier for others with the same business model to restructure for another fighting chance in the game,” said Mr Cheong.
But it is natural for existing occupiers and potential tenants to be worried about the future of WeWork in Singapore, analysts said.
Mr Cheong said new tenants may play it safe and opt for other co-working space providers at least until there is greater clarity about WeWork’s future.
“For existing tenants who still have some length of time before their contract with WeWork ends, they are obligated to stay on because WeWork has not defaulted on their leases in Singapore.
“It must be stressed that WeWork Singapore is still operating, their premises are open and it’s business as usual here.”
He added that if a tenant wanted to renew their lease for a short period, they may still stick with WeWork.
“However, for those who wish to continue operating from a co-working environment and not wanting to fear workplace disruptions, there is a high probability that they may switch to another operator or take on a lease themselves,” said Mr Cheong, adding that it ultimately boils down to orders from the headquarters for multinational tenants.
Huttons Asia’s Mr Lee similarly said that the key benefit of a flexible space is the length of the contract. Unlike a typical office contract which is three years, a co-working agreement can be by month, and some tenants may opt for a shorter lease, he said.
Tenants’ concerns about WeWork’s operations in Singapore may also lead to price pressures for the company, noted Frost and Sullivan’s Asia-Pacific managing director and partner Shivaji Das.
Since tenancy agreements with organisations like WeWork are shorter, tenants would be “less concerned” about a possible closure, he said. But tenants may not be willing to pay the same prices they used to pay.
Frost and Sullivan, where Mr Shivaji works at, is also a tenant at the WeWork space on 9 Battery Road.
The global research and consulting firm’s local office opened this March, said Mr Shivaji, but did not disclose the number of employees who make use of the space.
Mr Shivaji said that the company is “not immediately” looking to shift to other co-working spaces as the contract renewal is a few months down the line.
However, he added that the firm will consider various options which include having its own space “now that the pandemic is over”.
Likewise, co-living company Casa Mia Coliving – which is located in WeWork’s 83 Clemenceau Avenue office – told CNA that it has spoken to other co-working operators.
“We were thinking of what to do when renewal comes,” said co-founder and CEO Eugenio Ferrante, adding that the company will wait and see how the situation evolves.
The company, which has been at WeWork for over a year, currently has 10 employees using the office.
Mr Eugenio added that the firm also provides temporary staff members such as interns access to common areas. “One of the nice things (about) being at WeWork is that these changes are easy to make,” he said.
“This location is great for us since we have so many of our co-living homes in River Valley and there are very few options for flexible office space around here.”