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Exploring the Value of Management Contracts with The Hive Lai Chi Kok

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Asia’s leading coworking operator, the Hive, announced the launch of its 10th location in Hong Kong recently: The Hive Lai Chi Kok.

The new location, which is the flex office provider’s 20th location in APAC, boasts an impressive 8,000 sq. ft. of open-plan workspace that’s equipped with a pantry, meeting rooms, and keyless entry, providing the perfect home for businesses at every stage. 

But beyond the new space’s spacious rooftop terrace and fully-stocked bar for member events like open-air cinema nights and happy hours, The Hive Lai Chi Kok represents an emerging trend in coworking. 

The space is a partnership between The Hive and boutique Hong Kong real estate developer and private investment fund, Vivid Invest. The project is indicative of how the coworking industry is moving away from traditional leasing agreements and towards management contracts with local property owners and developers.

A coworking space in Hong Kong.

Although the usage of management contracts has been increasing in popularity in other markets, the agreement between The Hive and Vivid Invest is the first of its kind in Hong Kong.

For property owners, introducing flex office space to their buildings and entering this type of agreement offers them a higher potential in both occupancy and income in times of an economic slowdown. 

In a recent article by Hive Life, Vivid Invest’s managing partner, Chris Bannerman, discussed the key differences between management contracts and traditional leases for coworking spaces.

The majority of coworking spaces are currently still managed based on a traditional fixed lease agreement, where the coworking operator signs a lease for a couple of years and has the freedom to use the asset as he likes during that period,” Bannerman told Hive Life.

“With a management contract, the landlord becomes the de facto owner of the coworking space. Instead of leasing out the asset for a fixed lease, a management contract is signed with an operator to manage the asset for the landlord for a fixed or variable fee,” says Bannerman. 

According to Bannerman, having a management agreement in place means the coworking operator can focus on creating communities, developing their brand, and building a member base — rather than asset development or asset management.

At the same time, the agreement also gives landlords the opportunity to optimize the underlying revenue potential of their own assets. 

A coworking space in Hong Kong.

“In that sense, it’s a mutually beneficial arrangement – but it requires a coworking operator who’s really good at building communities and has a strong brand, and a landlord who understands the underlying value proposition of his own asset and is willing to explore it,” says Bannerman.

As COVID-19 continues to impact businesses all over the world, this trend will only evolve. Many coworking operators are already aware of the benefits of management contracts and asset owners, especially those facing vacancies and falling rents, are becoming more open to exploring new operational structures.

The Hive Lai Chi Kok is now open, located in the 13/F Tai Cheung Liberal Factory Building, 3 Wing Ming Street, Cheung Sha Wan. Membership prices at the Hive Lai Chi Kok start at HKD1250 per month.

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