Larger established companies are now among the prospective clients, not just startups.
In a new trend in the global coworking industry, a number of major space providers are moving away from the original model of flexible, communal workplaces mostly geared toward entrepreneurs, remote workers, and startups. The new business plan offers comprehensive, customized workplace solutions that cater to large, multinational operations at much lower costs than renting and outfitting traditional office space.
In Taiwan, rapid growth in the coworking field over the past few years, led primarily by locally grown coworking space operators, has attracted the attention of a number of these major industry players, who are now targeting the island as they continue to expand operations across the Asia-Pacific region.
While some acknowledge the benefit of a large, diverse coworking space market in Taiwan, such a sea change in the nature of coworking could present challenges to Taiwan’s smaller operators in the future.
Taiwan is a relatively new entrant to the coworking scene. The first Taiwanese coworking spaces began opening around 2011. These were mostly smaller venues catering to niche markets like creative enterprises and students. That changed in 2012, when Tyler Lin, a software engineer by training, founded CLBC, Taiwan’s first commercially focused coworking space.
According to Eva Wu of CLBC’s Public Relations Department, at that time it wasn’t enough just to open a space and start marketing. The company essentially had to lay the groundwork for the market to exist and expand.
“Back then, most Taiwanese people weren’t quite sure what coworking was. There wasn’t even a Chinese translation for the word,” says Wu. “So, we ended up spending a lot of time and effort the first couple of years educating the public and government on what coworking is, and how it’s different from business centers, coffee shops, or traditional office space.”
Lack of awareness or understanding among government officials was not the only issue for coworking operators in Taiwan. Wu notes that the absence of regulations specifically governing the design and safety of coworking spaces led to occasional inspections and fines for not complying with building codes meant for traditional office space. It was a real learning experience for the company, who has since become sought to provide guidance to other, newer spaces on how to be in compliance.
Despite some initial hiccups, the efforts of CLBC and other seminal coworking ventures paid off, and the market began accelerating in 2015. As of now, there are somewhere between 50 and 60 coworking spaces throughout Taiwan.
The rise in the number of coworking spaces on the island likely also correlates with central and local government policies that have made operations easier and more profitable. An example is the Tsai Ing-wen administration’s focus in recent years on encouraging the establishment and development of startups. The growing number of early-stage startups has increased demand for low-cost, low-commitment office space. A number of Taiwanese spaces – including the first government-run coworking venture, FinTechSpace – even double as startup incubators and accelerators.
In addition, many so-called “digital nomads”– loosely defined as remote workers and freelancers with no fixed location – are choosing Taiwan as a base for living and working, or at least as a stopover destination.
Andy, a software engineer from Poland, spends most weekdays working at the Hive, a Hong Kong-based coworking space provider that opened its first Taiwan location earlier this year, where he maintains a dedicated desk. Asked what he likes about working remotely in Taiwan, Andy touches on the fact that while it is well-developed and modern, he doesn’t have to break the bank to live comfortably.
He’s not alone. The website nomadlist.com, a crowdsourced database of cities popular among digital nomads, rates Taipei number 15 out of hundreds of other destinations, with individual reviews emphasizing the city’s friendly people, high internet speeds, safety, and affordability.
A new direction
Taiwan’s boom in coworking space is now expanding beyond the smaller local and regional operators. After eyeing Taipei for years, major multinational flexible workspace providers have recently begun entering the market.
Singaporean coworking company JustCo made its Taiwan debut this year with three massive locations opened for business in July. Among them are their flagship location occupying all seven floors of the Dian Shih building in Taipei’s upscale Xinyi District, as well as a whopping 70,000 sq. ft. location in the Hung Tai Financial Plaza.
In an interview with Taiwan Business TOPICS, Kong Wan Sing, JustCo’s founder and CEO, detailed the company’s recent expansion efforts, funded in part by a US$177 million investment by GIC, the Singaporean government-established sovereign wealth fund, and Frasers Property Limited, a multinational diversified property conglomerate headquartered in Singapore.
Taiwan is just the latest location in that expansion. “JustCo aims to be number one in Asia and scale is key for us,” says Kong. “Hence, we saw Taiwan as a potential market for us to further build our presence across Asia Pacific.”
Also moving into Taiwan this year was the American “community company” WeWork, founded in New York City in 2010. Although WeWork now has a firmly established presence in China and a number of other Asia-Pacific countries, the company’s leaders have expressed their excitement over the opening of their first Taiwan locations. Christian Lee, vice chair of WeWork Asia, emphasizes Taiwan’s reputation and growth potential when explaining the company’s move to the island. “Taiwan is known for its strong high-tech capability and information and communications technology (ICT) industries. Moreover, Taiwan is a dynamic market that cultivates endless creativity and a fertile ground for innovative technologies and startups,” says Lee.
However, for JustCo, WeWork, and other large-scale providers, coworking is no longer just about providing flexible workspace to the original cohort of individual professionals, startups, and small and medium enterprises. Cary Chang, a manager at JLL Taiwan, observes that large international companies have increasingly opted for coworking-style solutions to their office space needs, particularly as a cost-saving measure.
“If a company chooses a traditional office, it will need to pay the fit-out costs, the construction fees, and design fees at the beginning,” notes Chang. Such costs can be staggering, up to NT$80,000 per ping or higher. “Even for a big company, the rent, deposit, and capital expenses required upfront can be very terrifying.”
Another factor, Chang says, is that vacancies in Grade A office space in Taipei are diminishing, bad news for the large number of companies looking to move in or move up in what real estate services and investment firm CBRE calls a “flight to quality.”
Coworking setups offer an attractive alternative for companies looking to further expand their operations, an alternative that is now in abundant supply. “These large corporates are adopting the coworking concept as they enjoy the cost savings, workspace flexibility, community programs, and more,” says JustCo’s Kong. “Also, employees will be connected to a community of talented and dynamic individuals where they can harness the collaborative energy in a co-working culture.”
This is where the “enterprise solution,” offered by both JustCo and WeWork, comes into play. It aims to meet increasing demand from large corporates by offering spaces tailored specifically to their needs and their brands. This may include signage, private entrances to shared spaces, and bespoke office design, the costs of which are amortized, rather than paid upfront.
As a business model, this approach has proven quite effective. WeWork’s enterprise clients now constitute 40% of its total members, and the company boasts a roster of tenants that includes Facebook, BlackRock, and Citi. Meanwhile, JustCo’s Enterprise360 program has attracted General Electric and tax advisory firm Grant Thornton. The company recently landed its first Taiwanese enterprise client: a multinational pharmaceutical firm with a workforce of over 400 employees.
Given this trend of rapidly expanding coworking chains offering workplace solutions to an ever-growing list of large-scale clients, there may appear to be little room for Taiwan’s original and smaller operators to thrive. After all, such operators do not often possess the space or resources needed to accommodate larger companies.
However, JLL’s Chang believes coexistence is possible. “They are basically aiming for two different sets of clients. The real threat may instead be to providers of serviced offices, since JustCo and WeWork will be offering a similar body of service to similar clients, but for a cheaper price.”
CLBC’s Wu concurs. While the large chains continue to grow their enterprise client base, “we will continue to focus on providing services to small-scale and local clients.”
Moreover, smaller operators may be able to offer a more individualized level of service and greater flexibility to their clients by sheer virtue of their scale. Andy, the Polish software engineer, points out that while he’s had more opportunities to network and join events at the Hive, the major perk of working at a local coworking space is the attention to detail.
“If it’s a small space, the owner is almost always there, making sure there is coffee in the coffee machine and toilet paper in the bathroom.”