JustCo To Open More Coworking Centres In Asia Pacific

ASIA PACIFIC – After achieving a profitability milestone in August 2022 due to a recovery in its markets, Singapore-based coworking space operator JustCo plans to roll out more outlets across the region, reported The Business Times on Friday afternoon (10 February, SGT).

Its Co-founder and CEO Kong Wan Sing revealed that they have registered positive adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) every month since last August.

Notably, the coworking space operator tracks its profitability based on EBITDA that takes into account lease payments made to office landlords, one of the biggest costs of JustCo.

The company shared that demand for its coworking space has recovered to the point that selling rates in JustCo’s higher performing markets rose by at least 30 percent last year, with its average portfolio occupancy reaching 80 percent as of January 2023.

“[Workers] are coming back, and we are able to sell at the rates we want,” noted Kong.

However, recovery has been uneven across JustCo’s markets. Australia, the coworking space operator’s 2nd biggest market outside of Singapore, is “not performing so well as employees are returning to their workplaces at a slower pace.

The coworking space operator also exited China and Indonesia in December after closing an outlet in Shanghai and two others in Jakarta

“China, for the past six to seven years, has been a very tough market,” said Kong.

In Shanghai, Grade A office vacancy surged to 15.9 percent in Q3, while that in JustCo’s core market – Singapore’s central business district – the vacancy level was just 6.1 percent, based on data from Knight Frank Research.

“Another reason (why JustCo struggled in China) is the policies. We can’t keep up with the changes, and couldn’t travel there for the last two years. We don’t know what’s going to happen in the next year,” explained Kong.

He shared that JustCo just needs an occupancy of at least 60 percent at a non-subsidised selling rate before it can break even, but it also depends on the terms of its agreements with office landlords.

Usually, coworking operators have expanded by renting office space from commercial property owners. While they earn revenue from members that utilise the coworking space, they also shoulder the costs of fitting out and operating the space.

However, JustCo wants to shift to securing management contracts. Under this deal, instead of paying office rent, the coworking space operator oversees the space. In return, the profit is split between both parties, or the operator’s earnings is based on performance-based attaining milestones. Additionally, the landlord bears the fit-out costs.

So far, management contracts comprise around 10 percent of JustCo’s deals with landlords, and the firm targets to grow that proportion to 50 percent over the next three years. Notably, the company’s recently opened coworking centre at the International Plaza in Tanjong Pagar is under a management contract. The outlet opened last December and presently has an occupancy rate of 40 to 50 percent.

“You really need to be able to prove and convince a landlord that there’s a real demand, and we are the ones who can manage that for them and make their yield better,” Kong added.