Rents are sky-high in some of China's top-tier business districts, but companies big and small have discovered a cooperative solution -- by Deng Yaqing
When you try to rent an office or an apartment in one of China's metropolises, "An inch of land is worth an inch of gold" are words commonly heard by Chinese, who prize owning property, perhaps above all us. According to a recent report by CB Richard Ellis, the world's largest commercial real estate services firm, of the top six most expensive commercial districts around the globe, four are located in China.
Among them, the Central Business District of Hong Kong tops the list with $235.23 per square foot of rent per month, followed by the Beijing Financial Street, where the rent for office building can be as high as $195.07 per square foot per month.
The skyrocketing rent in big Chinese cities complicated with other operation costs makes owners of small enterprises feel squeezed out. Many of them have just opened shop. A similar predicament was encountered by Mr. A.G. Moufarrige.
After some time in the banking and real estate industries, Moufarrige hoped to apply his entrepreneurial skills to start his own business. Just like any other new company, he needed offices, receptionists and secretaries. He quickly realized that these overheads were eroding his bottom line. He wanted to share his space with other businesses to reduce everyday expenses.
In a corner office space in the MLC Centre Sydney in 1978 he used a piece of chalk to mark out the furniture and communal facilities. Here, the idea of serviced offices took hold.
During a period of 12 months, Servcorp expanded from two offices, one reception area and one meeting room to two floors of office space in the MLC Centre and an entire floor in Melbourne. Servcorp Ltd. is now a multinational organization that sells serviced office spaces worldwide.
A serviced office is the ideal choice for a company that longs to be present in a business district but cannot afford it on its own. So, they rent a shared space with other small businesses. Serviced offices provide reception and telephone services, secretarial support, conference and meeting facilities, video conferencing and Internet access.
In recent years, rapid economic development in China has given way to several businesses providing serviced office spaces. However, Servcorp has not thrown itself into aggressive expansion. "Our target is to be the most exclusive and service-oriented serviced office provider," said Michaela Julian, Servcorp's Senior Manager in China.
Regus, the world's largest serviced office provider, now runs over 1,500 centers worldwide, with 47 centers located in China. Unlike Regus, Servcorp selects top office towers in the world's most vibrant business cities. "We have never compromised our five-star standards," said Moufarrige.
Servcorp has the most powerful IT technology and communication networks in the marketplace. The company has spent $50 million to develop a global network platform, which is directly maintained and managed, in order to ensure that it can provide instant Internet services and the world's fastest bandwidth.
The built-in Onefone VoIP technology allows every client with an exclusive telephone number with Servcorp to make or receive calls from his or her laptop no matter where he or she is located, a function that helps clients save a lot of money and time. The company also created an iPhone app to allow its customers to book a meeting online in real time.
"Our competitors provide just like us offices, great locations, good internet. But it is the software that makes Servcorp special," said Michaela. For example, Servcorp's linked network, which is supported by its cloud computed technology makes it possible for you to get a local phone number in any location worldwide in less than five seconds where a Servcorp office is present.
Great flexibility has also helped Servcorp become the most cost-effective company in the business. Clients are not necessarily locked into a one-year agreement because leases range from one to 12 months.
The virtual office, a concept first pioneered by Servcorp, grants small and medium-sized businesses a possibility to operate in a corporate environment by reducing traditional office costs while maintaining an overall business professionalism.
"The virtual office is the future of any business, especially in China, where the rising real estate prices are making it very hard for companies to sustain their operational costs in CBD locations," said Michaela.
The Chinese market
During the 1980s, Servcorp quickly expanded to Singapore, Bangkok, and Kuala Lumpur, and successfully developed Asia's market for serviced offices. Today, Servcorp has more than 140 business center locations across the globe, with 35,000 virtual office clients worldwide.
Moufarrige began to examine the Chinese market in 1998. He believed that the potential of the future market for serviced offices and virtual offices would be huge in China. His prediction proved right.
In 1999, Servcorp's first business center in China was launched in Shanghai, bringing the innovative concept of serviced offices to China. Now, it has 12 business centers in six Chinese cities including Hangzhou, Chengdu and Guangzhou and Hong Kong.
Servcorp count as their clients a great many international financial consulting firms. Bloomberg has been with Servcorp for years because of its uncensored network, which allows Bloomberg to access financial data freely for its terminals. Luxury brands like LVMH, Prada and Dior, also take a fancy to Servcorp for its several locations and solutions.
In China, serviced offices and virtual offices are still new concepts for ambitious entrepreneurs, but a change of customer base is underway. "A couple of years ago, the proportion of Chinese companies against multinationals was 3:7. Now, the ratio is 5:5," said Cherry Jin, Sales and Marketing Manager with Servcorp.
"The concept of sharing space, to some extent, may still sound challenging to some businesses. But it's a good solution that allows start-ups to get rid of capital shortage, which is always the most frustrating obstacle, and spare more resources for its products, clients and marketing."