“There are concerns about the viability of the shared office business model. However, if the past decade has been a period of transformation for the shared office market, the next ten years will see it establish itself as a standard,” said Kim Dae-il, CEO of Fast Five, in a recent interview with Aju Economy.
Kim noted that while competitors have struggled to open new locations in recent years, Fast Five opened about ten new sites last year and plans to open more than ten this year. He added that not only revenue but also operating profit, net profit, and EBITDA have improved on an annual basis.
As companies seek to cut costs and operate office spaces more efficiently amid high interest rates and economic slowdown, the office market is rapidly evolving. Shared offices, which allow flexible use of space based on company size and needs, are emerging as a viable alternative to traditional offices that require long-term leases and significant upfront costs.
Fast Five has steadily increased its number of locations, positioning itself as a leader in the domestic shared office market. Last year, the company reported revenue of 149.3 billion won and an operating profit of 6 billion won. This year, it aims for approximately 20% revenue growth while opening more than ten new locations.
The company’s growth is attributed to an expanding customer base for shared offices, effective vacancy management, and a shift in business structure. Fast Five has broadened its clientele from startups and freelancers to include foreign companies and small to medium-sized enterprises. It has also transitioned from a model reliant on direct leasing to an 'asset-light' approach, sharing operational revenue with landlords. Additionally, it is expanding its business scope by connecting corporate clients with services in interior design, IT, and office construction.
Kim emphasized the essence of shared offices, stating that they are not merely about multiple companies sharing a single office. Instead, they connect large spaces with companies that require smaller areas, addressing a demand that traditional office markets have not met.
Historically, the office market was dominated by large corporations, financial institutions, and foreign companies leasing hundreds to thousands of square meters for extended periods. However, advancements in technology, such as mobile and AI, have led to an increase in companies generating high added value with fewer employees, resulting in a more segmented demand for office space.
Fast Five has secured large spaces and offers a range of options from single offices to larger suites, attracting demand that traditional office markets could not accommodate. Approximately 80% of its total space consists of independent offices for companies, with only lounges and meeting rooms shared.
The customer base for shared offices has expanded from startups and freelancers to include foreign companies and small to medium-sized enterprises. Demand for small to medium-sized offices is evenly distributed across key areas such as Gangnam (GBD), the central business district (CBD), Yeouido (YBD), and Pangyo and Magok. In residential areas, demand is forming around companies with 1 to 4 employees seeking proximity to their homes.
Kim stated, “Just as cloud services eliminate the hassle of companies having to build their own servers, shared offices reduce the burden of creating and managing office spaces. This can be seen as the rental or cloudification of office space.”
Amid market stagnation, Fast Five has adopted a strategy to manage both vacancies and pricing. The average vacancy rate across all locations is maintained at 5-8%. Rather than lowering prices to eliminate vacancies, the company views the approximately 5% vacancy that occurs during tenant transitions as a 'natural vacancy rate' and aims to maintain appropriate pricing.
Kim explained, “To achieve a 0% vacancy rate, we would have to lower prices at some point to fill spaces, which could reduce overall profitability. Maintaining a vacancy rate around 5% while keeping prices stable helps ensure stable operations.”
When opening new locations in key areas, most spaces are typically filled within 2-3 months. Kim noted that even with demand, it takes time to establish new sites.
The ability to adjust contract terms and space sizes according to company needs has also contributed to stable demand. While traditional offices typically require lease agreements of 2-3 years, with larger spaces often extending to 5 years, Fast Five offers contracts starting as short as 3 months. If a company’s workforce increases during the contract, they can move to a larger office within the same location or distribute their organization across multiple areas.
Kim remarked, “In just six months, a company’s workforce can significantly increase or decrease, making it burdensome to determine office space needs 2-3 years in advance. The flexibility to change contract terms, space, and work locations is a key competitive advantage of shared offices.”
The expertise gained from operating shared offices has laid the foundation for new business ventures. Fast Five currently operates a membership lounge for individual users called 'Five Spot,' a corporate office construction service named 'Powered by Fast Five,' an interior design brand 'Hyphen Design,' and IT services for small to medium-sized enterprises called 'Five Cloud.'
As tenant companies grow, Fast Five supports them in building larger offices and provides assistance with interior design, IT infrastructure, and ongoing operations. The strategy is to expand beyond merely renting space to becoming an office platform that connects all aspects of a company’s operations.
Kim concluded, “We want to be the first company that corporate clients turn to when they need workspaces, regardless of size. Our long-term goal is to become a dominant player in both markets, to the point where landlords feel they should entrust their vacancies to Fast Five.”
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.