The place I walk into on Level 11 of Menara KEN TTDI in Taman Tun Dr Ismail is spacious and modern, with plenty of natural light and splashes of colour on the furnishings. I can smell the aroma of coffee, and taking a few steps further in reveals the source — a barista is preparing a cup for a customer in surroundings that could be described as something similar to Starbucks, but with big windows that offer a great view of the neighbourhood. All around, there is a vibrancy, with people working on their laptops, chatting or deep in discussion.

My first thought was, how great it would be to have an office here.

Juhn Teo, cofounder of Common Ground, laughs when I share my initial reaction with him. He understands where I’m coming from because that’s precisely what he and his business partner, Erman Akinci, felt while visiting co-working spaces in Singapore and London while they were doing research.

“We came back from the visit and turned to each other and said, ‘I want to work in those spaces’. It feels like you can get serious work done and have fun and network at the same.

“I used to work for a property developer. It was the most boring office — there was no culture, no vibrancy, no one looked forward to going to the office. And that was the thing that struck us — the energy that came from people working in an open, collaborative space. It just makes working more enjoyable. We are by nature very social animals … at least, most of us are,” says Teo.

Coworking or flexible workspace has seen tremendous growth in the past two years or so. According to Colliers Asia-Pacific Flexible Workspace Outlook Report 2017, the flexible workspace sector really took off in 2016 in Asia-Pacific. Global company WeWork set up centres in Shanghai, Hong Kong, Seoul and Sydney, while traditional operators such as Regus rolled out its Spaces brand in Singapore, Tokyo and Sydney.

“There was a certain resistance in the beginning because Asian culture is quite different and the coworking movement is a very Western thing,” says Teo.

He points out that it is not exactly a major reinvention but a proven concept that has been around for many years. Most would recognise it as the flexible workspaces provided by the likes of Regus and Servcorp.

“Coworking is taking the existing concept of subdividing large office spaces in Grade A buildings in great locations to lease to companies and modernising it. It’s done by making it more attractive to more workers, and incorporating lifestyle elements and community building that benefits the members, rather than just offering a basic space for work.

“Coworking is definitely more lifestyle driven and becomes more of a club or a community, which is, I believe, what separates it from traditional serviced offices,” opines Teo.

Coming together

Taking a step back, the idea for Common Ground started when Akinci and Teo were still in their former jobs. Teo was working at the property development company, while Akinci was the development director at Catcha Group.

“We have been friends for a long time and sort of talked about the coworking concept as something to look into for Malaysia and Southeast Asia. This was about three years ago and I saw it as a real estate disruptor.

“We can see the rise of coworking in the UK, the US and Australia and we thought it could work in Malaysia. Then, the Catcha Group liked the idea as well. Catcha thought it was one of the concepts that could be replicated in Southeast Asia.

“This has always been Catcha’s modus operandi — not as an innovator but a time-zoned investor. It looks at concepts that have worked overseas and sees which might be successful in Southeast Asia. Coworking was one of the concepts it really wanted to explore. And that’s how Catcha become our founding investor,” shares Teo.

Common Ground opened its first centre in Wisma UOS Damansara II, Damansara Heights in Kuala Lumpur, in March last year. This was followed by another centre in Wisma Mont’Kiara in Mont’Kiara in October, Menara Ken TTDI in December, and the latest in Menara Worldwide, Bukit Bintang, in February.

“We see this business from our point of view as well as the landlords’ but it really comes down to the bottom line … we have a certain benchmark to hit that we feel is healthy for our business. And so far, it shows that we have been profitable from the start and are sustainable as well,” says Teo.

The occupancy rate is another gauge. The target is to hit 85% occupancy rate in the first six months of operation for every centre. According to Teo, Common Ground has achieved that.

“Damansara Heights hit 95% in the fifth month, and the Mont’Kiara and TTDI centres got to 80% in less than five months, so we should reach 85% soon. The Bukit Bintang centre has just opened and we are already at 30%.

“However, the occupancy rate is meaningless if it doesn’t translate into a healthy market. We look at our internal rate of return as well as this is a long-term investment; we are looking at about 40% to 50%,” says Teo.

Driving factors

Teo attributes the rapid growth of coworking space to several factors, starting with the increasing number of start-ups.

“We have seen big growth in this startup sector in the past few years. Startups obviously do not want to be locked into long leases and the cost that comes with running their own offices. They want to preserve capital. They prefer a plug-and-play space and love a collaborative environment,” says Teo.

Technology is obviously a big enabler. “The fact that we have become so connected through our smartphones and laptops means that we  can work remotely from any location, which can help us greatly because of the traffic congestion. That’s partly why we opened in different locations so that you can pick the one closest to you at any given time,” he explains.

Another important factor is the shift to a coworking model in multinational companies and large corporations, a fact Colliers has noted in its report, “End users are seeking more collaborative environments and looking to align themselves with innovation and talent.”

Among the eye-catching end-user deals in 2016 highlighted by Collier were the 100 desks taken by PwC in Singapore’s Collective Works, and the 400 desks by HSBC in WeWork’s Tower 535 in Hong Kong.

“This is proof that multinational corporations based in APAC are following the widespread adoption of this space previously seen in the UK and US, notably Microsoft moving 70% of its sales staff in New York to flexible workspace and KMPG and Deloitte using the space in several markets,” says Colliers.

“These big companies want to adopt that vibrant, young startup culture that they can’t get in their headquarters. They want to move into a place with that culture and absorb it. What is really interesting is that we are seeing this in Malaysia as well,” says Teo.

Celcom took up space in Common Ground Damansara Heights for its new brand Yoodo, which was launched recently.

The reason, the telco told Teo, was because it wanted the Yoodo team to think outside the box to allow it to differentiate itself from the parent company and attract a different target market.

“We have something similar in the works. Our upcoming Ampang centre is a joint venture with Petronas. Petronas wants to be more innovative with some of their departments and it will embed its innovation guys within Common Ground in Ampang,” says Teo.

Among the larger companies taking up space in Common Ground are global influencer entertainment and marketing company Gushcloud with 67 seats and the Chartered Institute of Management Accountants with 62 seats.

Building a community

Community building is a major part of coworking and it’s no exception at Common Ground.

“Every venue is run by a community team of about three people. Their key performance indicators include having to increase collaboration and interaction between the members. We do this in a number of ways, one of which is through events,” says Teo.

Each centre will have its own calendar of events, planned well in advance and released every Monday, which include talks on a diverse range of topics, from accounting to fitness.

“One of our most popular events is the town hall, which is held every month. It gives a platform for member companies to talk about their businesses to the whole community … it’s a great way to let everyone know what they are doing and to network. Most of all, it enhances the community spirit and opens up the possibility for future interaction or collaboration ,” explains Teo.

Common Ground also links the community through a members’ portal and app. The member portal is called the Ambition Engine, which Teo describes as LinkedIn meets Facebook.

“It’s very social and user-friendly,” he says, as he shows me the newsfeed section of the Ambition Engine on his laptop. A variety of topics pop up, including a post by a member on a forthcoming margaritas night (which appears to be a popular post). Another is about a unit to rent, while there is also an announcement about an upcoming talk.

The Ambition Engine allows members to create groups based on their interests. For example, there’s one on biking, for foodies, and even for surfing. There is also a jobs board, which Teo believes will be very exciting to see as Common Ground expands regionally.

“We have about 1,100 people in our community now and we hope to get 3,000 people by the end of the year. The big one now is the hiking group … the members go for a hike every Saturday and come from all four centres.

“It has become a very organic and self-sustaining kind of interaction because we now have the scale. It’s very important for a coworking community to have the quality and quantity of members to interact with each other. That was part of our strategy — to try and scale as fast as possible so we can grow this community,” explains Teo.

He believes that for coworking to work on a wide and deep scale and to be sustainable, it can’t be restricted to just one industry such as tech.

“Don’t get me wrong … tech companies make up a good 20% of our profile but for us to grow, we have to cater to all industries.”

According to him, based on a survey carried out by Common Ground, the average age of the members is 38.

“This shows that most of our members are proper business people who have been around for a while. It’s not a bunch of 24-year-olds who have just received funding for a startup. If the majority of our members are such entrepreneurs, our business would be very shaky and the churn rate would be very high.

“Our industry mix is very diverse. Our last survey shows it is very segmented — we have tech, consulting, large multinationals, advertising, media agencies and even a psychologist. The female and male ratio is evenly split down the middle and in terms of locals and foreigners, some venues such as Damansara Heights will have more expatriates. But average it across all centres, and it’s about 85% local and 15% foreigners, which is what we like,” says Teo.

An all-encompassing membership

It was vital for Common Ground to be transparent and seamless when it came to its memberships.

“We want it to be an all-encompassing membership and we didn’t want any hidden fees. Our monthly fees will include a set amount of meeting room usage, depending on the size of the company and a set number for photocopying, among others.

“We want everything to be included in one package and the most important thing is that the members are here to be part of the community. Of course, if they go over the usage allocation, we will charge per use. But honestly, the allocation is pretty generous so we don’t have any going over the set numbers,” says Teo.To keep things simple, there are three types of membership — hot desk, fixed desk and private office. And they can be as short as one month and as long as three years.

“The prices for fixed desk and private office are different for each venue. Hot desk is standardised because of our ‘passport’, which allows our members to use any of the hot desks in any Common Ground centre,” says Teo.

A hot desk membership is priced at RM699 per month, fixed desk ranges from RM699 to RM899, and private office from RM899 to RM1,299.

The sizes of the centres range from 12,000 sq ft to 30,000 sq ft with the TTDI centre being the largest.

“The sweet spot is 20,000 sq ft. We can go smaller and larger but generally, we try to avoid going smaller than 15,000 sq ft. Common Ground is the largest coworking company in Malaysia right now. We only opened in March last year and we are up to four venues. Many of the others are still at one venue despite opening earlier than we did,” says Teo, adding that it is common for large companies or MNCs to take up larger spaces in Common Ground.

Teo and Akinci have big plans for Common Ground this year. They plan to open another eight more centres in the Klang Valley, which will bring the number up to 12 by year end. Among the locations will be Ampang, KLCC, Ara Damansara, Sri Hartamas, Sentul and Mid Valley City.

Common Ground will also be opening four centres in Manila this year and three in Bangkok.

“We picked the Philippines for a couple of reasons. From an economic standpoint, the data is very strong with GDP growth of 6%. The Philippines is also quite foreign investor friendly and there’s a lot of growth in the startup and SME sectors.

“For better or for worse, the business processing outsourcing (BPO) sector has taken up a lot of the Grade A and B+ office space across Manila and even in Cebu, and that has driven up the rents. Landlords don’t see the point in subdividing the floor into smaller units to rent when they have no problem getting one company to take up large spaces. There’s an opportunity there for coworking space,” says Teo.

“We feel Bangkok has a similar dynamic to Manila, but not as extreme. There is a thriving local business community there that wants something more out of their workspace and small offices in Grade A buildings. We saw the same thing two years ago in Kuala Lumpur — the need for a cool, vibrant, collaborative, flexible workspace,” adds Teo.

There are plans to expand outside of the Klang Valley.

“We are looking seriously at Penang and Johor. These are the two epicentres where we believe the coworking concept will be appealing to the local business community. We are also looking closely at Singapore and Jakarta; we just haven’t identified the right partners yet,” says Teo.

With four existing centres, 10 more coming up in Malaysia and seven others in the region in a short time, it is safe to say Common Ground is moving fast ahead of its competitors. Where the company and the coworking business are heading will be interesting to see in the coming years.

Source: The Edge Markets

Photo source: The Edge Markets