SINGAPORE (EDGEPROP) - Flexible workspace provider The Executive Centre will expand its footprint in Singapore when the new extension to its centre at One Raffles Quay North Tower opens on July 1. The 38,736 sq ft extension will occupy the penthouse level on the 50th floor and an office space on the 49th floor. (See also: KKR and TIGA Investments-led consortium acquire The Executive Centre)
The Executive Centre is one of the largest premium flexible workspace providers in Asia Pacific, with over 150 centres in 32 cities. The company was founded in Hong Kong in 1994 and it has grown to serve over 32,000 members. It has been operating a flexible workspace centre on the 25th floor of One Raffles Quay since 2006.
“We are on track to open the new extension at One Raffles Quay by July 1 and we are excited to share this premium space with our members,” says Yvonne Lim, managing director of Southeast Asia at The Executive Centre.
She adds that the new centre sees strong presale commitments and will open with about 97% of the space already leased.
“The fitout process was quite challenging because the pandemic already delayed some construction works, and tighter safe management measures during the recent Phase Two (Heightened Alert) interrupted ongoing work,” says Lim.
She adds that the bulk of the pre-committed space will go to a large technology firm that has taken up about 1½ floors, and the remaining space is leased to several banking and finance companies that have signed a five-year enterprise solution with The Executive Centre.
The provider also accommodated the relocation of one of its clients which had an office on the 25th floor to a new space on the 49th floor.
This vertical growth strategy is characteristic of The Executive Centre which prefers to grow within buildings where it already has a presence, says Lim. “For example, at One Raffles Quay, we have occupied the 25th floor since 2006 and it has been one of our most successful centres in Singapore with over 90% average occupancy,” she adds.
The workplace operator has six centres in Singapore: at Marina Bay Financial Centre, One Raffles Quay, Six Battery Road, Ocean Financial Centre, The Gateway West, and Frasers Tower. At Ocean Financial Centre, it has occupied the 40th and the 37th floors since January 2020.
“With the lack of new prime office supply in the pipeline in the CBD over the next two years, vertical expansion is what we will focus on, especially in centres where our average occupancy is over 90%,” says Lim.
She says that the centres in Frasers Tower and Ocean Financial Centre meet these criteria and the operator is well-positioned to expand in those buildings in the future. “We are still definitely looking to expand into some of the new and upcoming office buildings in the CBD,” says Lim.
In this aspect, The Executive Centre is bucking the trend by sticking to prime Grade-A office buildings in the CBD, at a time where co-working operators are looking at city-fringe locations to grow their network.
According to a JLL report, Benchmarking Cities and Real Estate, published on June 14, while physical distancing is likely to end, companies face pressure to rethink their office spaces. “While in major cities such as Hong Kong and London, high office rental costs could reduce occupiers’ propensity to de-densify, fortunately for Singapore, our relatively lower office rental costs would render the opportunity cost of de-densification more compelling,” says Tay Huey Ying, head of research & consultancy, JLL Singapore.
“The Executive Centre has been clear in terms of expanding our network and our key focus is premium Grade-A office developments in CBDs,” says Lim. In the same way business-class airline passengers are willing to pay a premium, most members who sign up with The Executive Centre are willing to pay a premium to enjoy the facilities and services a premium product offers, she says.
Conventional office occupiers are the driving force behind the recent demand for flexible workspace in Singapore, says Lim. These clients prioritise flexible lease terms and the ability to scale their space requirements.
She adds that there has been strong demand from China-based and US-based technology firms which are seeking office space in Singapore to support regional expansion plans or host satellite teams.
“Not all of these firms opt for fully flexible workspace solutions. For example, technology firms typically need two or three floors of conventional office space, but they also factor in short-term flexible workplace solutions on a project basis,” says Lim.
She also notes that corporates which are moving from a conventional office space into a hybrid flexible work environment typically do not cater for space to fill their entire headcount. “For example, if they previously took up 20,000 sq ft of conventional office, they might only commit to 10,000 sq ft to 15,000 sq ft of flexible space,” she says.
This is because many of these firms are already factoring in some of their employees adopting a permanent work-from-home arrangement, she says.
On June 1, The Executive Centre announced that a consortium led by investment funds KKR and TIGA Investments will acquire the flexible workspace operator for an undisclosed sum. As part of the transaction, funds advised by HPEF Capital Partners and CVC Capital Partners will exit their investments in The Executive Centre.
“We are pleased to welcome KKR and TIGA Investments to The Executive Centre as our new investors. It’s a powerful partnership, well matched to drive the continued performance and growth of The Executive Centre,” says Paul Salnikow, founder and CEO of The Executive Centre.
“As the future of work increasingly shifts towards a hybrid model, we look forward to partnering with Paul and his team and helping to elevate the company to its next phase of growth,” says G Raymond Zage III, founder of TIGA.
The Executive Centre has been steadily expanding its network of centres in Asia Pacific by about 20% y-o-y over the past decade.
“While the pandemic slowed our expansion plans in 2020, in terms of our overall expansion strategy, The Executive Centre is still very positive on the outlook for the flexible workspace industry in the region,” a spokesperson says.
Looking ahead, the recent acquisition by the two investment funds could pave the way for a future public listing of the flexible workspace operator. “A potential public listing is something that has been on the table, but this is unlikely to happen within the next two or three years. This may be something on our agenda later, but there is no particular timeline that we can comment on at this time,” says the spokesperson.
In Singapore, while many corporates are moving into hybrid office environments, or in extreme cases migrating to entirely work-from-home arrangements, many still appreciate the synergy of the workplace and communicating with people, says Lim.
“Thus, flexible workspaces such as co-working will continue to be an important part of corporate real estate planning,” she adds.