Since last year, many people have been instructed to return to work in the office and that has led to a drop in the use of alternative workspaces, also referred to as co-working spaces.
In the first place, HR consultant Srithren Krishnan observed, such workspaces were not well-accepted as employees felt that they did not belong.
“After all, it is only a temporary set-up,” he pointed out to FMT Business.
Early this month, New York-based WeWork filed for bankruptcy, marking a new low after struggling to recover from the pandemic and its failed initial public offering in 2019.
By then, the company’s stock had lost more than 99% of its value, coming down from a peak of US$47 billion to US$45 million.
Approach with caution
Research institution Bait Al-Amanah analyst Yugendran Sivakumaran sees the WeWork collapse as a wake-up call for those who want to go into the business.
Given that it is still a developing market, it is best to grow with the demand while keeping up with the trends, he told FMT Business.
Srithren said the co-working concept might not be ideal for all industries but could benefit small and medium enterprises (SMEs) or those involved in short-term project-based assignments.
Uncertain future
The co-working spaces industry is expected to face more challenges going forward.
Yugendran said landlords may be hesitant to rent out space to these companies while investors could be hesitant about putting in more money.
He said the expected glut in office space, which will lead to lower rentals, may also reduce demand for co-working spaces.
Srithren said employers may also prefer to rent the extra office space instead of using co-working spaces.
He pointed out that rental rates for co-working spaces are high because they are usually short term, making it more rational for businesses to have their own office space.
Working offsite, at home or in a co-working space, also comes with some disadvantages. For instance, Srithren pointed out, it makes it difficult for employees to keep up with developments at company headquarters.
Still good
While it has had some impact, the downfall of WeWork is not the death knell for the co-working spaces business.
In Malaysia, sentiments remain positive.
Many acknowledge that the end of the Covid-19 crisis has left a dent in the business but most are positive that there will be new demand.
Timothy Tiah, CEO of Malaysian alternative workspaces provider Colony Co-working Space, is unperturbed.
Demand has actually risen post-pandemic, he told FMT Business.
“So, that has been pretty good for the industry. As demand rises, supply has remained strong,” he added.
Tiah credited WeWork for a lot of investor interest in co-working spaces. “We have also benefited from it,” he added.
Srithren said there is significant potential for the industry to bounce back.
“The challenge is to make it sustainable. Concerns such as data security must be addressed and it must evolve to meet future trends,” he added.