A corner of CoGo coworking space in Hai Ba Trung District, Hanoi.

Mr. Kim Daeyoung - Director of GS Shop (Korea), said he was looking for a coworking space in Ho Chi Minh City to expand business in Vietnam. In early March, a team of 5-7 people from Korea will come and work with a team of 10 people in Vietnam. With a small scale and close working with startups, he expects the shared workspace will be suitable for the company's specific operations.

More and more foreign companies have moved to Vietnam, pushing up office demand, and the coworking space model has been actively supported by this increase. Many domestic businesses also consider this type of office as a plan to cut operating costs - JLL - real estate market research firm said in a report in January.

Traditional offices often lease large areas and long-term contracts, so many small businesses, freelance workers (freelancers) often look to coworking space in the first phase, Trang Bui - JLL Vietnam director said. This type of office is designed and gives start-up an opportunity to meet other business models that can become their partners, Trang said.

Appeared on the market 10 years ago, the new coworking space emerged strongly in the last three years. According to a survey of JLL, the supply in HCMC increased by an average of 31% per year in the period 2014-2017. This increase has made Ho Chi Minh City the highest proportion of shared workspace in Asia Pacific, accounting for 8.1% of Grade A office supply - much higher than the average of 2.9% of Asia Pacific region.

CBRE Real Estate Market Research Company estimates that in 2018, the total floor space of flexible workspace will reach over 37,000 m², increase 109% compared to 2017. This is an impressive growth by expansion of existing operators such as Toong, Up, Dreamplex, Regus, and the joining of WeWork and CoGo.

Especially WeWork, one of the most valuable start-ups in the US, opened the first center in Ho Chi Minh City at the end of 2018 and announced two more offices will be launched in HCMC and Hanoi this year respectively. WeWork connects Vietnam market to WeWork globally with nearly 300 offices in 77 cities and more than 270,000 members as of 2018. This brand is expected to contribute to boosting the coworking space segment in Vietnam.

Meanwhile, Toong currently has 10 locations in operation and is expected to have four new locations by April this year, reaching both Laos and Cambodia markets. After three years of operation, Toong connected more than 3,500 members. Their customers are start-ups and multinational corporations, from one-member businesses to businesses with more than 700 employees.

“We develop more services to exploit, develop and manage a coworking space model for building landlords and provide consultancy on working environment changes for large businesses. The thinking of shared office is for individuals and SMEs now obsolete”, Do Son Duong, co-founder and CEO Toong shared with Forbes Vietnam.

Market share of shared workspace supply in HCMC as of the end of 2018. (CBRE Vietnam)

The emergence of this model also changed the structure of tenants of the traditional office sector, which is expected to continue leading the demand for office leasing in the near future. "The coworking spaces as a tenant will help the landlords’ leasing activities better, but also take away the area and make less choice for tenants,” Le Trong Hieu - director of consulting and transaction services department of CBRE Vietnam pointed out.

Supply of this office type increased sharply, but it was also filled quickly, partly due to the scarcity of supply across the office market. CBRE estimates the occupancy rate in the fourth quarter of 2018 is approximately 80%. Transactions with this type also accounted for the highest rate in the past year, accounting for 22% of the total transactions.

Currently, the office market in Ho Chi Minh City, which is in short supply, has pushed the rental price to a record in the past few years. This poses a problem of finding space for coworking space runners, which is expected to boost this segment further this year.

Office investors also make use of retail spaces which are currently ineffective to convert to leasing offices.

Several trade centers are converting a part of the area into a shared workspace. Toong opened a general working space of 1,300m² in the shopping complex of The Vista building, District 2. There are also coworking spaces in the retailed area of Leman (district 3) and Estella Place (district 2)

"The scarce market of coworking space supplies must find more diverse premises, not only in office buildings but also in unused spaces," Trang Bui said.

The unfavorable retail premises are also in the sights of coworking space operators by lower costs, while the coworking space model can also help retail podiums do better business when they use service inside buildings, Mrs Trang said.

"The coworking space operators increasingly fierce competition for large office space, but also face the problem of filling space. Some factors, if not carefully calculated, such as location, investment method, etc. may cause obstacles to attracting tenants for the investment premises”, Trang said.

Proportion of tenants in the coworking space according to the type of enterprises of quarter IV.2018. (CBRE Vietnam)

The need for common workspace is now not only for startups but also for large businesses. According to CBRE statistics, more than half of tenants rent coworking space from large companies and corporations.

"Previously, mentioning coworking space, no one thinks of big businesses but now coworking space has become a common trend with relatively much supply, enough for multinational enterprises to consider besides other office choices" , Mr. Hieu said

"Three years ago, the coworking space market was extremely bleak, now it is more exciting. Businesses in this field will still grow strongly in the coming time, but what keeps customers in is the culture is formed in that space”, said a general manager of a coworking space manager.

Truong Bui

source: Forbesvietnam