While many businesses are running into serious difficulties, the coworking space model is forecasted to thrive and become a cost-saving solution for businesses.
Coworking Space model is being chosen by many Start-ups
Starting the business in the middle of 2019 in the field of tourism, Mr. Tuan (Ha Dong, Hanoi) is struggling in handling the huge amount of assets that he has invested.
At previous times when he and his three friends founded the company, he was too confident in the idea of start-up and had high expectations of the success so that he spent heavily on renting an office.
Having rented an office for nearly 20 million VND/month, deposited 3 months and paid one-year rent, Mr. Tuan had to pay nearly 300 million VND. Moreover, the investment for equipment, tables, chairs, air conditioners, furniture costs nearly 100 million VND.
Huge investment in the facilities creating the impressive “image” for the company, Mr.Tuan expected it to an advantage for the business. However, after only half a year of operation, while the company hasn’t gained the royal customers to bring stable revenue, the Covid-19 epidemic made Mr.Tuan unable to “get up”.
One month after the social distancing due to the pandemic is also the time when the company stopped doing business and retuned the office. Hundreds of millions VND invested in the furniture was forced to liquidate at a low price and the pre-paid office was not likely to be returned.
Mr. Tuan’s situation is also the general situation of many businesses after Covid-19. According to the report on assessment and supplement of the socio-economic situation of the Minister of Planning and Investment, in 3 months from the beginning of the year, there are nearly 34.900 businesses withdrew from the market which increases 2% compared to the same period in last year.
In particular, there are 18.600 businesses temporarily closed, which increase 26% comparing to the same period, 12.200 businesses stopped operation and waited for dissolution procedures.
Talking about the failure of businesses and start-ups in general nowadays, Mr. Vu Van Thanh – General Director of VNGroup said that besides the objective factor is the Covid-19 epidemic causes businesses operating in difficulties, another important factor is the visions of businesses.
The most important issue of starting a business is what to do business on, is paid less attention. Most of them are only interested in pouring money into investing facilities to make it spectacular from the beginning.
Meanwhile, the current fact is the success rate of Start-ups is very low. Many young people successfully start up a business only in the fourth or fifth times. As a result, after 6-7 months of ineffective operation, businesses must be dissolved and return the offices.
“At that time, all the money invested in facilities, office equipment, and machines must be liquidated at a low price. Investing too much in assets will not “generate money “and also increase the rate of depreciation of fixed assets”, Mr. Thanh acknowledged.
Explaining the cause of the wasteful investment for the office system, according to Mr. Thanh, most of the businesses do not understand the expense problem. They focus too much on “the outward”, the cover without paying attention to the inward activities.
On the other hand, start-ups also expect too much success without noticing about the risks.
According to Mr.Thanh, small businesses and start-ups should calculate more efficient plans for renting an office is to use the co-working model (shared office).
Understanding simply, this is the style of work which people share office space for many companies to work together, using the areas and equipment that private office waste in using to optimize costs but also has private space for each company to work such as meeting room, event or conference hall, entertainment room.
Many opinions on the market said that using coworking costs 60-90 USD/m2/month is more expensive than a normal office with a cost of 15 USD/m2/month.
Actually, when renting in these shared offices, the investor has equipped everything from tables and chairs, equipment, functional rooms… businesses don’t need to invest further. Therefore, the co-working model is thought to be expensive but in fact, it is cheaper and more cost-effective.
“After 2-3 years in operation, when businesses have a number of customers and generate stable revenue, they will have the capacity to rent a fixed office to create a basis for a long-term and sustainable development in the future”, Mr.Thanh shared.
Will Coworking take the throne after the epidemic?
In fact, regarding big cities like Hanoi, Ho Chi Minh, Danang, a lot of domestic and foreign businesses have increased the investment into shared offices in recent years.
Many coworking spaces have launched such as Regus, Toong và Up, NakedHub, WeWork, or CoGo, Tiktak in recent. In particular, the one that has the fastest growth is Toong which currently has 14 locations already in operation and is planning to reach both Laos and Cambodia markets.
VNG Group is also having the planning to speed up in expanding Tiktak Coworking Space chain. This enterprise has 3 locations currently and is planning to open two more locations this year.
CBRE’s report assesses the co-working market in Vietnam is still on the fast-growing trend now. Over 90% of businesses in the market are small and medium businesses and the start-up trend has brought a number of customers for this office model.
The development of Co-working in HCM city is very strong. The Hanoi market is equally exciting. The occupancy rate of this segment is about 80% on average.
The potential of co-working space is very high, however, according to Mr. Thanh, this model in Vietnam is still new and has not developed equally to its potential.
The co-working spaces in the market are only doing business about leasing offices, organizing events, or training activities. Meanwhile, the greatest value of coworking is the connection between businesses, to foster the idea of start-up for young businesses.
There are a lot of units that misunderstand the concept of “What is co-working?”. They think that co-working is simply a place proving workspace for people in need. This is true but not completely.
According to Mr. Thanh, coworking is developed in the direction of building a connected community of many people in the co-working space. Co-working is the place to converge different start-ups. Everyone who comes there will have the chance to meet and interact with each other. It becomes a favorable environment for the expansion of relationships. Thereby, businesses find opportunities for cooperation and development together.
Also according to this leader, another reason that co-working in Vietnam has not developed strongly is that the investor faces difficulties due to high costs. A coworking system includes many functional rooms such as warehouses, meeting rooms, relaxing rooms requiring investors to invest synchronously to meet all the demands of tenants.
On the other side, when developing a co-working space, the businesses cannot expect immediate profits, it takes about 3 years to have stable customers. That is the reason why there are few businesses that are enthusiastic and fully invested in this office model in the long-term.
However, Mr.Thanh believes that, after the epidemic, when many businesses face difficulties due to a sharp decrease in revenue, the model of shared office will further assert their values and benefits, especially for small businesses and startups. Coworking Space in Vietnam is forecasted to grow strongly in the future.
Mrs. Do Thi Thu Hang – General manager of Consulting & Researching, Savills Hanoi said:” Due to the impact of Covid-19, Q1/2020, the occupancy rate of coworking space segment has decreased significantly because of the typical short lease term and flexible contract.
We currently have coworking space that reduced the price of services by 20-30% to retain customers, especially some coworking spaces that have discounted up to 50% for first-time customers.
There is also a situation that some investors are considering to restructure the operating locations based on the performance of each location.”
Source: TheLEADER