Found8 restructures amid Covid-19 crisis
By Timothy Tay
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - The prolonged effects of Covid-19 and work-from-home trend has sped up consolidation in the co-working sector. Bearing the brunt are some of the niche, co-working operators.
Homegrown co-working operator Found8 has had to make tough calls in the past few months to keep its businesses going. The flexible workspace operator had to let go of some of its staff and restructure its business in Singapore.
In an email to members and associates of its co-working network on Oct 27, Found8 co-founder and CEO Michelle Yong says that the firm had to “undergo a substantial restructuring exercise in order to survive this prolonged Covid-19 crisis”.
Niche co-working operators in Singapore, such as Found8,have had to make tough calls in the past few months as the impact of the ongoing pandemic affects businesses and office demand. (Picture: Found8)
Found8 is part of the Aurum Group of companies comprising real estate developer Aurum Land, corporate venture capital firm Aurum Investments, and fitness and wellness centre Core Collective. Found8 has built its network in Singapore and Malaysia as a co-working space provider and an innovation hub that typically targets smaller-sized companies and start-ups.
Read more: Core Collective opens in Dempsey Hill
Two of its entities, Found Corporate Innovation and The Hub Singapore, are now wholly owned and operated by Next Tribe, a parent company of which Grace Sai, the other co-founder of Found8, is the majority shareholder. Found8 itself is the result of a merger between Sai’s Found (previously Impact Hub Singapore) and Yong’s Collision 8 co-working operations in February last year.
The Hub Singapore operates co-working spaces at Prinsep Street and Orchard Road. The remaining Found8 co-working businesses — comprising office locations in Tanjong Pagar, High Street Centre, Amoy Street, and KL Sentral — are now wholly-owned and operated by Collision 8, where Yong holds a majority stake, while a minority stake is held by a venture capitalist.
Yong: Despite the challenges, we believe that co-working holds a promising future. More companies are now interested in the co-working model because of the flexibility it offers. (Picture: Samuel Isaac Chua/The Edge Singapore)
In the email, Yong assures members that the restructuring does not affect their membership contracts. “However, members of Next Tribe locations will no longer be able to access Found8 locations from Jan 1, 2021, and vice versa. In addition, the Next Tribe spaces will be managed by a separate team and will be rebranded in due course,” she says.
“It is with a heavy heart that we have had to make this very painful decision in order to ensure the survival of all the respective business units. This was the only way forward,” she adds.
Ensuring survival
Speaking to The Edge Singapore, Yong notes that it has been a challenging period for the company as it had to suspend some operations because of Singapore’s “circuit breaker” measures and movement control orders in Malaysia.
“We were quick to offer discounts to our members at the onset of the pandemic. From early April, we had already extended rental reliefs to our members in a show of support and solidarity,” says Yong. This decision came before the operator embarked on any rental relief negotiations from its landlords or before the announcement of government support initiatives.
Although that had a direct impact on its revenue, Yong says: “It was important to show that we understood our members’ situation.” Consequently, most members have remained with Found8, she adds. However, she observes that the extent of the crisis has since had a severe impact on its co-working business, as well as the businesses of many of its members. Many members have been forced to downsize, and some have been forced to wind up their operations, she says.
In Singapore, the lifting of the government-imposed circuit breaker gave some relief as a few members returned to work. But Yong says that close to 90% of Found8’s members are still working from home. Safe distancing measures in Singapore also limit the number of people who can return to the office, she adds.
Flexible workspaces, such as Found8's coworking location High Street Centre, face lower occupancy as most people continue to woork from home. (Picture: Found8)
“Consequently, a few of our members decided to suspend their memberships and some terminated or downgraded their membership plans,” says Yong. “But we continue to support everyone, even those who had to suspend their memberships.” This support included resource packs to help companies navigate Covid-19-related government regulations and monthly virtual sessions for people to share and find support within the community.
Some respite also came from new enquiries over the past few months as more companies seek remote working or split-team office solutions, says Yong. “We have seen increasing interest from traditional companies that typically sign conventional office leases, but are now opting for greater flexibility as they implement better business continuity best practices by having split teams across different locations and different times,” she adds.
Found8 has also rolled out new affordable and flexible membership plans that allow members to choose how many days in a week they want to work in the office space, and assign which team members they want to grant access on different days. This type of “pay per day per employee” model, as Yong describes, has been very well received so far, she says.
Job losses
Its new, flexible membership packages were, however, not enough to stave off the fallout from the pandemic. That led to a tough decision: a retrenchment exercise that saw its staff half in number from 30 at the start of the year to 14 today. According to Yong, it shows “how deep and prolonged the pandemic has been”. She adds: “It meant that it would have been very unwise for us to pretend that we didn’t have to make any changes.”
The company’s preference was to try to ask everyone to take a pay cut in order to preserve jobs. “But the severity of this crisis has meant that even that strategy would not have been prudent enough in the long term,” she adds.
Most of the staff who were let go were involved in Found8’s regional expansion and upcoming growth plans. According to Yong, the company had been making fundraising efforts since 4Q2019 with the hopes of expanding into several countries in 2021. Any expansion plans are now shelved in light of the market conditions.
Found8 also operates a coworking space at KL Sentral in Malaysia. (Picture: Found8)
Since news of the job losses spread, several Found8 co-working member companies have stepped forward to find new employment for the affected staff. Since then, all but one have found new employment. “I felt that the offer of support from the community was really overwhelming. We believe in open and transparent communication amongst our team members and the wider community. This show of support is a testament to the strong community bonds we have created over time,” says Yong.
Rents are another significant cost for the co-working operator, which is currently engaged in multiple discussions with its landlords in Singapore to negotiate some rental relief.
"But ironically, with the government announcing in May that landlords have to give some rental relief to their tenants, and then tenants like ourselves have to also give rental relief to our members, this actually held back a lot of the discussions as some landlords decided that they would wait until the IRAS sent the notification [of the relief] in August to resume discussions on rental reliefs, and even now in November we still have not received all the IRAS notifications," says Yong.
This meant that some landlords did not seriously advance any rental relief discussions until August this year, which compounded the cost pressures and cash flow issues faced by Found8. Yong says that she is still waiting to conclude some rental relief negotiations with some of the landlords.
Uncertain near-term outlook
Looking ahead, Yong says that while she expects the co-working sectors in Singapore and Malaysia to turn out stronger post-Covid and in the long term, the prolonged effect of the pandemic is casting some uncertainty on the immediate outlook.
Read more: The reimagined office
“Despite the challenges, we still believe that co-working holds a promising future. Several of the more traditional companies or companies that typically sign traditional office leases are now becoming interested in the co-working model because of the greater flexibility it offers,” says Yong. “Even pre-Covid, I have always believed that co-working is not a passing trend.”
Found8’s co-working space on Anson Road in Tanjong Pagar. The operator has rolled out new membership plans that are more flexible and affordable as companies implement split-team working arrangements. (Picture: Found8)
As some conventional office leases expire in the coming quarters, she expects more companies will reach out to landlords on reducing their space requirements, or even pre-terminating their leases as the business environment takes a hit.
Regarding Found8’s co-working operations in Malaysia, Yong says that it is uncertain how the country will deal with the pandemic in the coming months, especially since the recent expansion of movement curbs following a resurgence in cases.
In terms of its operations in Singapore, Yong is taking a “hope for the best, prepare for the worst” mindset. “We will continue to innovate here as we can keep listening to the needs of our customers. We have also secured sufficient funding to see us through a good period of time, barring any more unforeseen circumstances,” she says.
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