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Asia Pacific outpaces the rest of the world in the growth of flexible space

Nearly 30% of Grade A buildings in China's Tier 1 and Tier 2 cities will comprise flexible space to meet the changing corporates' demand by 2020, according to JLL's latest research

SHANGHAI, 3 July 2018 - JLL's (NYSE: JLL) new report Spotting the Opportunities: Flexible Space in Asia Pacific points out that the flexible space stock recorded a compound annual growth rate of 35 percent across the region. From 2014 to 2017, the number of major flexible space operators in Asia Pacific more than doubled, as did the overall stock of floor spaces in some cities.


Since 2015, flexible space has been evolving rapidly in China; and the recent growth of the co-working operator rollout has been phenomenal, leading to an office market reformation across the country. JLL Research shows the demand from flexible space has effectively contributed to the net take-up of China's Grade A buildings in the past two years - with the total take-up in Tier 1 cities increasing from 50,000 sqm in 2016 to estimated 350,000 sqm in 2018; and its percentage against the total office space take-up rising from 1.8% to 9.7%. Data also shows that the net take-up in Tier 2 cities rose more than 10 times in two years, increasing from 25,000 sqm in 2016 to estimated 290,000 sqm in 2018; and its percentage rising from 1.6% to 8.4%. 

We see a sector in its own right, growing in size and importance to both building owners and corporate tenants. "By 2030, flexible work space could comprise 30 percent of corporate commercial property portfolios worldwide, while this figure is still around 5% now," says Jex Ng, Head of Markets of China and Managing Director of South China at JLL. "Although corporate adoption is still in its early stage in China, there are certain factors that will continue to increase the adoption of internal and external flexible space by corporates - which are looking to improve space efficiency, meet business growth needs, foster collaboration among employees, and boost innovation through new ways of working." 

Some corporates either have set up their own internal co-working facilities or have started incorporating features of flexible space into their existing offices to make the work environment more agile and attractive. This helps build a 'community' and can be a differentiator, particularly when it comes to attracting and retaining young talent. However, the adoption of external flexible space by corporates is in the trial period—part of which is the preferred choice for established companies, including leasing satellite office for business needs, utilizing the operator's space in the building for expansion, and using flexible space functional facilities. 

In response to the growing demand, JLL notes that landlords and developers have tried different ways to set up flexible space. These include leasing space to co-working operators, cooperating with operators to utilize their proven technology and facilities, or creating their own flexible space offerings to meet corporate tenants' needs. Daniel Yao, Head of Research of East China at JLL notes, "as more and more landlords and developers realize the true value of flexible space, they are also more willing to set up flexible space in their buildings. Nearly 30% of Grade A buildings will comprise flexible space to meet the changing corporate tenants' demand by 2020." 


The fast growth of the flexible space market is also aligned with JLL's "Future of Work" report launched globally in 2017 that "more organizations are looking for new and different ways to offer workplace as a service". 

What the future holds

The use of flexible space by corporates occupiers will evolve from the trial stage to widespread adoption. They will make full use of the advantages of both traditional and flexible space; integrating flexible space features within internal office areas, while using external flexible space to meet business expansion and temporary space demands. Multi-regional coverage across different regions; plug-and-play simplicity; flexible lease structure and fit-out cost control; and other advantages will further promote the growth in the corporate demand for external flexible space, particularly among large-scale established companies. 

With landlords and developers increasingly exploring flexible space, such space could become a standard amenity, and can be as essential to a business district as food and beverage outlets or a gym. Joint ventures or management contracts between landlords and flexible space operators are likely to become more common. Some major landlords in Asia Pacific are also moving to create their own flexible space offerings. Doing so can add value to their buildings, and maintain or even extend their relationships with tenants by offering a diverse portfolio of core and flexible space to meet their changing needs. 

Mergers and acquisitions between major operators in the industry pointed out that China's flexible space market has entered a new phase, and the activity will be a long-term positive market trend. Flexible space operators are also evolving fast and are increasingly offering office space or community as a service' platforms and tech-driven solutions, in addition to physical space; For flexible office operators, the contribution from large-scale established companies to their profits will be increasingly important. 

For more information, please visit JLL's dedicated flexible space webpage:

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Note: The research refers to flexible space as the net lettable area occupied by major co-working and serviced office operators in the market, excluding incubators, accelerators and corporates' internal co-working space.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with nearly 300 corporate offices, operations in over 80 countries and a global workforce of 83,500 as of March 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit