China Sees Co-working Boom Due to Increase in Start-ups and Rise of the Millennial Workforce

November 18, 201610:23 am
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China is in the midst of a co-working boom driven by an increasing number of startups and the rise of the millennial workforce, according to a new report by JLL. The concept of co-working – where people who are self-employed or working for different employers, share a space has been gaining popularity in Europe and the US for more than a decade, but is now taking off in Asia, and particularly in China.

JLL’s whitepaper identifies a number of factors behind the recent proliferation of co-working spaces in China’s biggest cities. In particular, the government’s encouragement of mass entrepreneurship is cultivating small-scale domestic startups that are increasing the tenants of co-working spaces.

Additionally, as millennials become more dominant in the workforce, their values of work-life balance and flexible hours are drawing them towards co-working solutions. However, co-working has also caught on with corporates as a more flexible alternative to traditional office space.

“The advantage that co-working offers fit well with a strategic push by many companies to increase flexibility, improve talent retention and recruiting, and build a sense of community,” says Joe Zhou, Head of Research, JLL China.

“The concept of co-working emphasises creating a space that supports collaboration, openness, knowledge-sharing, innovation, and user experience. While these spaces were nearly non-existent in China previously, they have recently grown exponentially in Beijing and Shanghai, with more than 500 co-working sites being set up over the past 18 months.”

Today, China is home to some of the best-known firms in the co-working sector such as US-based WeWork – which officially entered China in 2016, and has already secured three locations in Shanghai – and 3Q, launched by real estate giant SOHO China in 2015.

Other countries in Asia Pacific, such as Singapore, are starting to embrace this trend within the banking sector, where DBS, Visa, OCBC and Standard Chartered have set aside co-working spaces to stimulate greater idea-sharing among employees.

Meanwhile, in Bangkok, a number of new co-working operators are springing up, offering comfortable environments that are tailored to target demographic in trendy neighbourhoods.

“Successful co-working allows companies to engage with their employees, while its flexibility and mobility are especially valuable for businesses with high concentration of younger talent pools,” says Claire Stephens, Head of Workplace Strategy, JLL China.

“As the demand for collaborative workplace solutions grow around the world, the number of co-working members is expected to grow from less than 1 million in 2016 to over 3.8 million in 2020.”

Four factors driving China’s Co-working Boom are:

  1. Government support

The central government has made clear its support for start-ups. At the 2015 World Economic Forum in Davos, Chinese Premier Li Keqiang proposed “mass entrepreneurship and innovation” for China, signalling an official encouragement for small-scale start-ups, which are co-working spaces’ target tenants. The number of newly registered companies in China reached more than 4 million in 2015, up 21 percent from the year before.

  1. Rise of the millennial workforce

More and more companies in China are recognising the rising importance of the millennial generation who are increasingly shaping the workplace. While older generations in China valued working in a cubicle to call their own and prioritised job security, young workers today pursue different priorities, such as work/life balance and flexible working hours.

  1. Shift towards sharing economy

China’s sharing economy is booming. Ride-sharing app Didi Chuxing (similar to Uber) and home-sharing website Xiaozhu.com (similar to Airbnb) are just two examples of online sharing services that have become essential for young people in China. Additionally, when SOHO China launched SOHO 3Q in Beijing and Shanghai, the co-working program was even marketed as “Uber for offices”. The fundamental concept of co-working aligns with the general shift toward the sharing economy.

  1. Technology boom

Advanced technology underlies many of co-working spaces’ unique offerings, such as convenient online booking and the building of online communities for members. The China Internet Network Information Center reported in January 2016 that the country’s internet penetration rate had reached 50.3 percent, 10.1 percentage points above the Asia-wide average.

Connectivity levels and comfort with technology are even higher in Tier 1 and 1.5 cities than elsewhere. A representative case is the popular social networking app WeChat, which has a 93 percent penetration rate in China’s Tier 1 cities and is well-known as a pioneer in a range of mobile services, from instant messaging to online payments.

Co-working provides a way for firms to engage employees and, thus, differentiate themselves in the eyes of footloose talent. Co-working space’s flexibility and mobility are especially valuable for companies with high concentrations of young workers, as is common in the IT industry and many professional service firms.

In China, local culture places strong emphasis on guanxi—interpersonal connections—as critical to success. Co-working spaces are designed to facilitate interaction among people from different companies, backgrounds and fields of expertise. Users of co-working spaces thrive on the potential to germinate an idea or business opportunities through an encounter at the coffee machine, or refine an approach through conversations over a networking drinks event.

An internal survey conducted by a popular co-working operator in Shanghai has revealed that more than 50 percent of its members have done business with one another, or are in talks to do so. By mobilising space to increase interaction between different divisions, corporate occupiers can foster creative thinking and speed up the development of new ideas, approaches or technologies.

 

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