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CBRE: Co-working spaces expanding and potential rising

Released at: 16:30, 29/05/2018

CBRE: Co-working spaces expanding and potential rising

Photo: UP Coworking space

Latest report from CBRE notes ongoing demand for co-working spaces in Hanoi and HCMC.

by Linh San

There will be a total of 45 co-working spaces in Vietnam by the end of the year, with Hanoi having 56 per cent and Ho Chi Minh City 44 per cent, according to the latest report from CBRE.

As at April there were 19 co-working spaces in Hanoi and 15 in Ho Chi Minh City, with more than 23 operators, including two from overseas. The number is up 62 per cent from 2017 and growth has been 55 per cent per annum over the last five years.

Major local operators such as Toong, UP, Circo, and Dreamplex are all expanding at an accelerated rate and each now account for a smaller market share than in 2017. As the market is expanding in terms of venues and operators, smaller operators with only one venue are appearing and are expected to rise from 30 per cent of the total last year to 42 per cent by the end of this year. Major local operators still hold market shares of 12 per cent each.

Foreign entrants such as NakedHub from China and Hive from Hong Kong have begun to make a mark, with Hive planning to open one more venue in the center of Ho Chi Minh City by the end of this year and NakedHub launching two in Ho Chi Minh City and Hanoi in the second quarter. Other international operators are also looking to enter Vietnam in the next two years.

Co-working spaces in Vietnam were previously not located in prime buildings or areas, as operators needed to keep rental costs at a manageable level. They are more usually found in underutilized buildings in decentralized areas, especially on the fringe of the CBD. Both Toong and UP, operate centers in Grade B or lower-grade buildings. In Hanoi, a few have located themselves in Cau Giay district, an emerging office cluster, while co-working spaces in Ho Chi Minh City tend to be more spread out among CBD-fringe districts such as Districts 1, 2, 3, and 4 and Binh Thanh and Phu Nhuan.

Recent developments indicate that operators are changing their game, targeting niche segments that dictate where they will be located. For example, as Toong offers space to a diverse clientele in different industries, its spaces are becoming more differentiated, with each having its own design. Circo, in particular, has always been more about location and convenience and as they expand their venues continue to be in locations that are easy to reach. UP co-working spaces, meanwhile, are generally geared towards startups, which means they are more conscious about places where younger startups are likely to be. It therefore cooperated with the Ho Chi Minh City University of Technology on a co-working space and incubator, where it also offers legal advice and human resources services.

Different costs

The cost of renting co-working space varies across cities, according to CBRE. Co-working spaces in Hanoi and Ho Chi Minh City are currently priced lower than in most other cities in Asia-Pacific, which reflects the general cost advantage of renting office space in Vietnam. In Ho Chi Minh City, after some co-working space operators expanded into the CBD at the beginning of this year, pricing has reportedly increased 30-50 per cent in central districts.

The typical features of a co-working space include a shared workspace with a shared reception, meeting rooms, access to high-speed internet, printing and copying machines, and cafeterias. Most of these facilities, such as internet, a receptionist, and a pantry with beverages such as coffee, tea, and water) are usually included in the rental rate. Members are given a monthly allocation for meeting room time and printer use and are charged extra if these are exceeded.

Extra amenities include food and beverages (F&B), which can also be an extra source of revenue for co-working space operators. Some choose to provide F&B services themselves while others outsource it. More co-working space operators are providing other amenities and special services such as art galleries, games rooms, beds and auditoriums. These communal spaces enhance the concept of flexibility, collaboration, and diversity and also appear more attractive to prospective and current tenants.

A study by CBRE Research Vietnam in 2017 found that 91 per cent of co-working space members are millennials, i.e. under the age of 35. This proportion is a lot higher than the global average of 67 per cent and reflects Vietnam’s young demographics, which offer a good source of demand for co-working spaces.

The study also found that more than 55 per cent of co-working space users are in IT, with the remainder spread across various sectors such as tourism, F&B, education, marketing, and real estate.

Looking forward, co-working spaces will continue to expand in Vietnam in terms of supply and niche offerings to targeted tenants. Foreign operators are aggressively trying to find space, especially in Grade A office buildings as well as upscale Grade B buildings in prime CBD areas, in order to establish both their brand and market share in the country.

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