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The Rise Of The Third Space: Post-pandemic, Flexibility Is Key To The Future Of Real Estate – Real Estate and Construction – Singapore



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COVID-19 has proven to be the catalyst to accelerate profound
change in the way we live our lives and use our buildings. The
world over, the real estate industry is wrestling with the
challenge of catering for new demands, navigating extraordinary
opportunities for the more innovative and agile investors and
developers.

Flexibility will be at the heart of the development of all types
of property and a single-use district will not be sustainable. This
applies to the Central Business District just as much as it does to
the suburbs. Both shall need to reinvent themselves.

A paradigm shift in the use of office space

The office work paradigm was shifting even before the pandemic,
motivated by factors such as environmental sustainability,
workforce efficiency and reducing operational costs. The days of
whole buildings being occupied by a single tenant for a single
purpose – in this case for use as offices – they say
are over. This development will have a significant effect on areas
like Central Business Districts (‘CBDs’) where buildings
tend to focus on a single purpose (e.g. workspace) and other
purposes are peripheral to that purpose.

The evidence is mounting:

  • Morgan Stanley predicts that office tenants across Asia will
    permanently give up between 3-9 percent of their existing office
    space.

  • The investment bank reported that office landlords across Asia
    Pacific are increasingly incorporating flexible space within their
    buildings.

  • In Brisbane, urban designers are now redesigning parts of
    the CBD, to reduce the concentration of workplaces in
    the CBD – something which designers had spent
    decades trying to do before the global pandemic.

In a recent example, Hong Kong’s biggest developer by market
value, Sun Hung Kai Properties is looking to change the design for
Hong Kong’s largest commercial site in West Kowloon. Its plans
include:

  • Reducing the office component by around 9 percent

  • Boosting the retail area by around 90 percent to over 600,000
    square feet

  • Adding in more open space geared towards community and the
    environment – a new 38,000 square foot community plaza and a
    1.5 kilometre-long green trail.

The changes are to be more in line with the current market
needs, said the blue-chip developer in a recent news report.

Homes, Suburbia and the rise of the “Third
Space”

Homes are taking on a new level of importance. Our homes have
become our offices, our children’s schools as well as our
families’ places of shelter. This will change the homes we want
to live in and build, as well as loosening constraints on where we
will choose to live.

People will expect their homes to deliver much more because they
will no longer serve a purely domestic purpose – they will
become places that fulfil home, workplace and social needs.

With the need to have a boundary between home and work spaces,
and the office becoming just one of the options to work from, a
“third space” has emerged that the hospitality industry
may be best placed to fulfil . The third space is outside of the
home and office where people can work but also socialise (and
perhaps exercise).

Hotel groups have been quick to spot that need. In the West, the
Hyatt group has rolled out its “Work from Hyatt” packages
at more than two dozen properties across the U.S., Mexico and the
Caribbean.

In Asia Pacific, several big hotel groups have also rolled out
Work From Home packages for their hotel rooms, including Sofitel
Singapore City Centre, Fullerton Hotels and Furama Hotel Group.
These luxury and business hotels are marketing their spaces as both
flexible working spaces and areas for accompanying family and
children such as on-site gyms, conference venues, swimming pools
and lounges.

Most of these hotels offer two main options – packages for
day-use of rooms and packages for shared work spaces such as
lounges or meeting rooms. The former can set you back from $106 to
$280 for a duration of 12 hours. The latter option is a more
economical option at $19.20 to $150 for a duration of 12 hours,
with some hotels even offering monthly passes. These have proven to
be popular with locals, with Furama Hotel raising the prices of its
“work-from-hotel” passes within two months of its
introduction. These packages can include complimentary
refreshments, parking, printing and even usage of the gym.

Understanding social behaviours: rethinking the role of the
city

Socialising is the second biggest reason for city living.
Understanding this holds the key to appreciating why this period of
change is potentially so fundamental and what the role of the city
will be. If investors start turning away from the city, they could
well invest more in residential areas.

As people spend less time in their traditional workplaces and
more time remote working, they will also socialise nearer to home.
As such, semi-social spaces such as bars, cafes, restaurants and
hotels offer potential to replace the social network that was
previously built around the office.

Despite the F&B industry being among the hardest-hit in this
pandemic, operators don’t believe that socialising is going
away because of COVID-19. Some frame their position as a
gamble, but ultimately believe that people will always crave social
interaction. The question is, what will socialising look and feel
like in the next few years?

The variables are dizzying, but we can expect to see our
communities transform as some areas benefit from their location and
amenities and others face decline, possibly followed by
reinvention. A radical change in thinking like this will open up
the regions around cities and further afield, and will provide
opportunities for developers, particularly those focused on
sustainability and the environment, in the creation of new
communities.

This article was first published by Singapore Global
Network here on 11 Nov 2020.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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