WeWork Is Closing 2 Singapore Locations: Is There a Wider Problem?

WeWork, a name once synonymous with the rise of coworking, recently announced the closure of two prominent locations in Singapore. This follows its Chapter 11 bankruptcy filing in the United States, marking another blow to a company that reshaped how people think about office spaces.

These developments raise important questions: are WeWork’s troubles unique, or do they reflect a broader slowdown or recalibration in the coworking industry?

The following takes a look at WeWork’s struggles, the state of the coworking market in Asia and globally, and the challenges and opportunities that lie ahead.

WeWork’s Singapore Closures

WeWork’s decision to close its City House and 51 Tras Street locations in Singapore is part of a broader restructuring effort. These closures are aimed at cutting costs and refocusing operations to address financial woes exacerbated by years of aggressive expansion and a failed IPO attempt in 2019.

WeWork’s struggles stem largely from its unsustainable “growth-at-all-costs” model. The company prioritised rapid expansion over profitability, signing long-term leases at premium rates while offering flexible, short-term contracts to clients. As demand fluctuated, this model proved precarious, leaving the company exposed to financial instability.

The State of the Coworking Industry

While WeWork’s troubles dominate headlines, the coworking industry as a whole continues to grow. In fact, flexible office spaces have proven resilient, bolstered by the rise of hybrid work models and increasing corporate adoption. A survey by CBRE found that 70% of companies globally plan to adopt coworking solutions in the next two years.

Demand Drivers

- Hybrid Work Models: The pandemic reshaped workplace norms, with many organisations adopting hybrid setups that reduce dependency on permanent office spaces.

- Cost Efficiency: Startups, SMEs, and large corporations alike appreciate the ability to scale up or down without committing to long-term leases.

- Community Benefits: Freelancers and entrepreneurs are drawn to the networking opportunities and collaborative environments coworking spaces offer.

Asia’s Coworking Market

Asia, home to many emerging economies, is witnessing strong growth in coworking. Singapore remains a major hub for the industry due to its role as a global business centre, but other markets such as India, Malaysia, and Indonesia are also expanding rapidly.

Key Statistics

- In Malaysia, coworking spaces account for just 1% of total office space, compared to 3% in Singapore and higher percentages in Western markets. Analysts predict penetration could reach 30% as demand grows.

- WORQ, a Malaysia-based coworking operator, reports 90% occupancy across its locations, reflecting robust demand in the region.

Drivers in Asia

- Corporate Adoption: Large corporations are increasingly using coworking spaces as part of their hub-and-spoke strategies.

- Strategic Location: Many coworking spaces in Asia are situated in prime business districts, offering easy access to clients and collaborators.

- Affordability: Flexible terms make coworking spaces attractive for startups and SMEs in countries with high real estate costs.

Is There an Industry Problem?

While WeWork’s struggles highlight risks associated with rapid expansion, they do not necessarily indicate systemic issues within the coworking sector. Instead, the industry appears to be evolving, with successful operators adopting more sustainable models.

The Competition Advantage

Competitors like Regus, Spaces, and WORQ focus on operational efficiency and sustainable growth. Unlike WeWork, they avoid overexposure to long-term leases and instead prioritise profitability.

The Market Shift

The coworking industry is no longer characterised by unchecked growth. Operators are refining their offerings to meet changing client needs, including more flexible lease terms, enhanced amenities, and hybrid work solutions. This shift ensures that coworking spaces remain relevant in a competitive real estate landscape.

Challenges for Coworking Operators

Despite its growth, the coworking industry faces several challenges:

- Economic Uncertainty: Global economic volatility could dampen demand, particularly among smaller firms and startups.
- Occupancy Risks: Underutilised spaces can quickly become financial liabilities.

- Intense Competition: Operators must differentiate themselves through pricing, services, and location.

- Hybrid Work Impact: While hybrid models drive demand, they also reduce the need for large, permanent office spaces.

The Future

The coworking industry’s future looks promising, particularly in Asia, where low market penetration offers significant growth potential. As businesses increasingly embrace flexibility, operators have opportunities to innovate and capture new market segments.

Emerging Trends

- Technology Integration: Smart office solutions, such as app-based bookings and IoT devices, are becoming standard in coworking spaces.

- Sustainability: Green building certifications and eco-friendly designs are gaining importance as clients prioritise environmental responsibility.

- Niche Offerings: Some operators are targeting specific demographics, such as women-only coworking spaces or facilities tailored to tech startups.

Lessons from WeWork

WeWork’s story provides important lessons for the industry:

- - Sustainable Growth: Operators must focus on profitability rather than expansion for its own sake.

- - Transparent Governance: Strong leadership and clear financial management are crucial for long-term success.
- - Client-Centric Design: Customised solutions, such as private offices within coworking spaces, can attract a diverse clientele. Click on the youtube link below to view an interview with Jason Nangle of Angle Recruitment, who was specifically seeking a custom private office solution for his team.

Wrapping Up

WeWork’s closure of two Singapore locations underscores its ongoing challenges but does not signal a broader downturn in the coworking industry. On the contrary, the sector continues to grow, driven by demand for flexible, cost-efficient office solutions.

In Asia, the coworking market is thriving, with strong growth potential in both established hubs like Singapore and emerging markets like Malaysia and India. However, the industry will likely need to adapt to economic uncertainties and evolving workplace trends to remain competitive.

Ultimately, WeWork’s struggles serve as a cautionary tale, highlighting the importance of sustainable growth and operational efficiency. The coworking industry remains an innovative and evolving part of the global workplace ecosystem, offering flexibility and community in an era of rapid change.