Albeit, experiencing some hiccups in recent times, the city’s economic fundamentals have so far remained resilient, with property prices maintaining at a high level, from residential to commercial to offices. This red-hot real estate market not only imposes more financial burdens upon ordinary households, but also translates to more hurdles for entrepreneurs.
In the face of soaring property prices, co-working space — in which numerous freelancers, startups and companies share the same office space, hardware and ancillary services, with a particular focus on community spirit — has been on the rise across the globe in the past few years, given its lower cost compared to traditional office space. And this trend has come to the city lately. This issue of Macau Business takes a look at two of the co-working spaces here, dissecting their pros and cons.
Local businessman, James Luo, runs a brand design firm, which was originally located in a tiny shop at street level. The rental lease of the shop lapsed by end-2018, meaning his company had to look for a new space due to a rental hike.
“We could not find a space that fit the operational and financial requirements of our company,” he noted. “Some office spaces would have been suitable if the [monthly] rent had not been $30,000-$40,000.”
Not until he joined a trip for local startups to visit Brazil last year, did the idea of co-working space pop up in his mind. “I visited a lot of co-working spaces [in Brazil], which have worked really well,” Mr. Luo noted. “If this could do well in Brazil, I though there should also be a market in Macau as well for this type of office space.”
This experience, together with the conditions of his company, inspired him to invest about MOP500,000-MOP600,000 to establish HUB Macau — one of the few co-working spaces in the city — in May last year. With an area of about 2,000 square feet, in an industrial building in Areia Preta, it is now not only the office for Mr. Luo’s own design company, also offering some 20 hot desks — open seats in the shared office — for freelancers and startups.
Besides the office space, HUB Macau also caters basic facilities, such as photocopiers, fax machines, pantry, a meeting room and a reading area with an artificial lawn, as well as company set-up services and others. It now charges MOP2,500 a month for a hot desk, and MOP120 for a daily pass, while tenants do not have to pay any deposits or sign any contract mandating a minimum time period for rent.
“We’re also a startup, and we know the difficulties for entrepreneurship in the city very well, so we offer flexibility for our tenants,” Mr. Luo explained, regarding why no contract is required for staying with HUB Macau.
In an interview in early December, the director of the co-working space revealed 10-12 out of some 20 hot desks have been successfully leased, with local residents accounting for about 30 percent of the tenants, while foreigners make up about 70 percent. The non-local tenants were usually those that had short-term stints in the city, and required temporary office space, he explained.
“We have had tenants that come from the United States, Great Britain, Germany and others,” he continued. “The proportion of local tenants is rather low because they want more privacy and are looking for standalone office rooms for rent.”
“Many locals did come here to look at the environment, but they indicated this [arrangement] was not what they wanted,” he noted. “It was kind of a setback for us in the beginning of our operation: co-working has been so popular in many places, including nearby Hong Kong, so we thought this [concept] would be widely accepted here too.”
Amid the lower-than-expected awareness and acceptance of co-working among locals, the team of HUB Macau has been promoting this concept and its benefits in the social media. “Any startups could save up to 70 percent of their costs [in setting up an office] by staying with us; namely, the two-month deposits for renting [traditional office space] and other expenditures in purchasing computers, furniture and so forth,” Mr. Luo noted. “The money saved could be put back in other areas of your business.”
In addition, HUB Macau also organises different activities regularly for the public to attend, including experience days for them to know about shared office space and to freely enjoy the facilities and services of the venue.
From his perspective, developing a community culture is key to the success of a co-working space. “We have a freelance photographer and a wedding host as our tenants, and they did not know each other before coming to our space,” he illustrated. “Now they work together and share their job opportunities after sharing and exchanging [insights and experiences] here.”
“The most difficult part of running a co-working space is to establish your own culture,” he noted. “While you could host activities to appeal to the market, you will lose your edge if you only appeal to the market.”
“We feel like the market is growing, with more people becoming aware of and accepting our service,” Mr. Luo said, highlighting the growth of startups in the city in recent years, which are involved in an array of areas other than traditional industries.
Expecting it would take three to four years for HUB Macau to recoup investment, he noted: “We think co-working space could become commonplace here.”
While most co-working spaces mainly provide hot desks, MSPACE, a 15,000-square-foot co-working venue located in Ocean Plaza in Taipa, is somewhat different, as it mainly caters standalone office rooms.
“My bosses and I have done a lot of market researches about co-working spaces and looked into the examples in Hong Kong, Singapore, the United States and many other places,” said Adelyn Wu, business development manager of MSPACE. “We did not simply introduce the overseas operational model here, but we have added our own twist.”
“We know Macau people prefer to have standalone office rooms, which is a predominant feature here,” she added in an early December interview. “Our space has been widely accepted by the market so far.”
MSPACE, becoming operational in October, with an investment of about MOP10 million, now caters two- to four-person office rooms, fetching a monthly rent between HK$6,600 and HK$9,800. In addition to the office rooms, the space also provides hot desks for individuals — a random seat in the common office area — at a monthly rent of HK$3,600, and a reserved desk — a fixed seat in an office room — at HK$4,000.
While tenants can enjoy basic facilities — including a meeting room for as many as 40 persons, a shared common area, IP phones, free coffees and snacks — they are also entitled to personalised secretary service, free cleaning service, printing and scanning service, company setup service and others.
Out of 60 office rooms in MSPACE, 26 have been successfully rented out in less than three months, according to Ms. Wu. Among the tenants, half are locals and half come from other places. “While some of our tenants are startups, some are also matured and developed companies in areas of logistics, legal affairs, design and airlines,” Ms. Wu revealed. “Some of them choose us because they require temporary office space in a transitional period of their operation.”
It’s nice for MSPACE to have a mix of startups and well-developed companies as its tenants, she pointed out. “As we all know, many startups may not last longer than the first three years [of operation]; if we had only relied on startups, there would have been a lot of ups and downs in our operation,” she reasoned.
Talking about the advantages of co-working spaces over traditional office spaces, she highlighted: “It takes a lot of money for companies to set up an office in a professional standard like us, not to mention the rentals and property management fees.”
“Some companies might think it makes more sense to rent a shop at street level for a monthly rent of about $7,000-8,000 in the area of Border Gate,” she continued. “It really depends on the needs of the companies, but we could provide a professional image for your business.”
Besides hardware and software, MSPACE also regularly organises events for its tenants to create the community vibe. The operator is also in talks with a gym located in the same commercial centre to provide discounts for its members to access the gym facilities.
Concerning setting up the co-working space in Taipa, Ms. Wu remarked, “There is a lack of office spaces in Taipa, but this doesn’t mean there is a lack of demand here.”
The overall operation of MSPACE has so far exceeded their expectations. “We expect there will be more new tenants after Chinese New Year because companies will review their financial results by year-end, some of which might cut costs and choose us,” she underscored.
“In the beginning, I had doubts [whether a co-working space would work here], as the Macau market is so small,” she noted. “But it turns out there is really a demand, given the soaring property rents.”
With the locals growing used to this new type of office space, the business development manager does not rule out the possibility of more competition this year, with more new co-working spaces in the city. “But we’re not worried about the competition — we will be fine as long as we could provide personalised and unique services,” she added.
Room for growth
With soaring property prices and rents and more new companies in small size, a property agency believes there is room for growth of co-working spaces in the city.
With the first co-working space in the world officially opening in the United States in 2005, this trend has started to gain traction across the globe, with the inception of global co-working space operators like WeWork and JustCo. According to the forecast of the Global Coworking Unconference Conference, there were about 14,400 co-working spaces in the world in 2017, and the number could double to over 30,400 by 2022.
This new type of office space could find its niche in the territory. Property agency Savills (Macau) Ltd recently published a report over the local office property market, indicating that the average office transaction price here enjoyed a nearly 16-fold increase in the 2002-2018 period, while the average office rents rose between 30 percent and 50 percent in the past five years.
The current rental level for Grade A office in Macau averaged MOP30-35 (US$3.75-4.4) a square foot, while the rents for other grades also amount to MOP25 a square foot, Savills noted.
The agency also highlighted that over 76 percent of new companies incorporated here in recent times only had a registered capital value of less than MOP50,000. Thus, it believes more foreign-capital firms and small-sized firms in Macau might choose co-working office space in the future, which only amount to about 30,000 square feet citywide at the moment.