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Tracking the industry’s trajectory with the Hive Founder Constant Tedder
Given how pervasive co-working spaces are today, it’s easy to forget that the concept is still considered young in the real estate world. Brad Neuberg is widely credited with pioneering the business model with the founding of San Francisco Coworking Space in 2005. Co-working has since become mainstream, with over 18,900 spaces worldwide as of 2018 (Statista), and the industry is set to service 5.1 million users by 2022 (GCUC).
As co-working comes into its own, providers are grappling with growing pains while embracing new opportunities. At the forefront of this evolution is Constant Tedder, founder of Asia-Pacific’s largest co-working operator, the Hive. An entrepreneur many times over with several successful exits under his belt–notably with United Kingdom-based video game publisher Jagex–he set his sights on co-working in 2012 because it offered the kind of flexibility and support he was looking for when he was building his startups.
He headquartered the Hive in Hong Kong, attracted by the city’s open economy, regulatory framework, entrepreneurial spirit, and reputation for being a regional business hub. It was by all accounts, Hong Kong’s first, true co-working space–broadly defined as a collaborative work environment with participants who share the same values.
“I wanted to create a beautiful work space that was like a second home. A place where entrepreneurs like myself could thrive. It was a new kind of space and new way of working, getting well away from the cramped layout, utilitarian lighting, and desk materials of traditional offices. I think, in that respect, the Hive was the first to bring co-working to Hong Kong,” says Tedder.
Partly as a result of the city’s notoriously high real estate costs, co-working soon became the most disruptive model to hit the commercial real estate sector in recent years. In 2017, over 90% of Hong Kong’s top 200 occupiers considered flexible workspace as part of their strategy (Colliers). The number of operators reached 283 in 2018 (SCMP), amounting to a total of 1.5 million square feet of co-working space (Statista)–an upward trend seen across many other Asia-Pacific markets.
Another cause for the flood of competition is demand from the city’s burgeoning tech and innovation sector, which has enjoyed government support over the past few years. Additionally, the effect of digitization on the surge of flexible work arrangements–epitomized by such terms as ‘digital nomad’–is driving adoption from freelancers and remote workers. Tedder also attributes the general rising interest for “beautiful, flexible, and creative” work environments to be a cause for this growth.
“They can be a large enterprise or a small enterprise, but they have the same mindset of looking for a beautiful working environment with creative energy and vitality. Having that kind of positive atmosphere is what people want from co-working spaces,” he adds.
A people-oriented approach is consistent with the literature; a study conducted by the University of Michigan (‘Should Your Company Embrace Coworking?’) found that “interactions with others” is the main reason people seek out co-working. Tedder has placed considerable focus on community-building to foster such an environment, which has played a defining role in the company’s operational and expansion strategy since founding.
“We have always believed that running the physical space is only 25% of what we do. Our whole ethos is based on engaging with different communities and utilizing spaces to act as a catalyst for people’s learning experiences, meetings and interactions, or business collaborations,” he says. “Events are a core part of our DNA and drive us to build a community.”
Walk through any of the Hive spaces and one will come across posters showcasing events ranging from documentary screenings, to entrepreneurship talks, to painting classes, which serve to connect members and increase stickiness. Each space is also built to encourage networking, with special attention placed on the design of common areas. Tedder has had a longstanding partnership with Soho House designer James Waterworth, who provided “a little design gold dust” to all of the Hive spaces.
the Hive was also the first in Hong Kong to introduce niche spaces, such as the Hive Studios, which is equipped with photography studios members can rent by the hour, and Hive CoFarm–a station for agritech and cleantech companies to test their pilot projects.
Other concepts include product designer-focused space MakerHive and lifestyle boutique the Hive Spa in Bangkok, all of which speak to the company’s intent to bring together communities from all industries and walks of life. The company’s digital magazine Hive Life celebrates the activities of creative entrepreneurs and its member app, Hivers, allows members to engage and collaborate with one another, where the theme of knowledge-sharing stands front and center.
the Hive Passport is a significant part of the company’s expansion strategy, as it gives members access to the Hive’s extensive network across seven countries. Tedder says that the company’s regional community, spanning Hong Kong, Singapore, Japan, Thailand, Vietnam, and most recently Australia, is a crucial differentiator for the company.
“We’re the largest regional network of spaces. I think that makes the biggest difference in terms of when enterprises look for a pan-Asian solution,” says Tedder.
He adds that the company’s strategy is to scale quickly while ensuring the business is sustainable in the long-term, as maintaining service standards and community engagement are the main challenges co-working operators face. Tedder considers scale to be a crucial competitive advantage, as it gives the Hive “operational experience and footprint to expand to more countries,” having launched 21 locations in the last seven years.
“Our model is not to have a single workspace. Our model is to have four, five, six locations in each city, as we have done in Hong Kong, and soon will have in all our other cities. Our rollout continues,” he adds.
The implementation of market-specific growth strategies by operators like the Hive points to how segmentation is becoming more evident in the industry. Tedder says that in the early years of co-working, there was a misconception that it only catered to startups and small or medium-sized enterprises. However, recent trends show that enterprise clients are also coming around to its benefits, both in terms of its flexibility and ability to attract the right talent.
“For many growing commercial sectors, attracting talent is very competitive. Having your team work in a beautiful workspace very much helps you to attract and retain talent,” says Tedder.
In 2018, WeWork–the world’s largest co-working operator owned by The We Company–saw its enterprise customer base grow by 370%, making up around a quarter of its revenues (HBR). While Tedder says that “in the last two years, the most dramatic change has been team sizes,” he also ascribes this shift to long-term tenants who have grown alongside the operators.
“We’ve had many companies that started as two people and now have a 24-person office with us. For them, that flexibility to not have to worry about office fit-outs, to be able to continue to grow with their teams without the constraints of space, has been a tremendous evolution,” says Tedder.
He likens co-working’s segmentation to that of established hospitality industries like the hotel industry. On the one hand, there are “operators that build big-box hotels, maybe slightly soulless, with average service and little sense of community.” On the other, there are boutique hotel chains that “pride themselves on interior design, a warm welcome, and stellar service,” which is where Tedder positions the Hive.
The industry’s transformation begs the question of how co-working behemoth WeWork will affect its future. Servicing around 268,000 members (as of 2018) in 637 locations across 111 cities (Recode), the operator is now the most valuable private company in the U.S. after Uber’s IPO in May this year.
Tedder says that the US$45 billion company has “evangelized the movement toward flexible work” and educated the market about co-working, but he does not believe the WeWork narrative dominates the space.
“I think WeWork would like to have us believe that it is winner takes all, but I don’t see that it is. They’ve obviously reshaped markets that they come into, but what’s interesting is that there’s plenty of room to grow for the best boutique operators like the Hive,” says Tedder.
WeWork is now New York City and central London’s biggest office tenant, meaning they are also digging into the traditional leased office and serviced office markets, which are starkly different from co-working’s community-oriented model. Also, by taking on corporate tenants like Mastercard, Salesforce, and HSBC, WeWork risks further diluting its once people-centric brand.
“To some extent, I see them becoming more and more of a standardized business. They’re losing some of their DNA. That leaves a clear opportunity for us to be true to those original values of warm welcome, community, service, and of giving people a place where they’re super happy to come in every day,” says Tedder.
Even though 30% of office space is projected to be flexible by 2030 (JLL), it’s difficult to predict how much of that growth will be taken up by co-working in its original form, given its hybridization with other concepts like corpoworking (i.e., imbuing co-working elements and values into corporate office settings). In light of the industry’s fluidity, operators that carve out their own identity are likely to be more successful as co-working continues to mature.
For Tedder and his team, the next few years will see the Hive ramp up its presence in the cities they currently operate in, while entering new markets such as Hanoi and cities throughout Australia. Members can look forward to new conceptual spaces in the pipeline, but the company’s mission remains unchanged.
“Our goal is to be a catalyst for success, providing a beautiful workspace and superb service that enables our members to thrive,” he says. “If we’re able to do that, then we see it as a success.”
Constant’s Advice for Entrepreneurs
Don’t just convince yourself
A lot of people, including myself in days gone by, get excited and rapidly commit to a business idea. But receiving feedback is crucial.
Speak to people, not just your friends; (a) they may not fully understand the business and (b) they’ll likely just say this is great. Ask people who would look at it from different angles. Learn to take a step back and assess, in the cold light of day, whether it’s a good idea.
Think creatively at every step
When I co-founded Jagex, my partner had an idea for delivering a game in a pretty creative way.
He realized that by accepting that the game would be more limited graphically using Java, he could deliver it straight to the player in a browser. At the same time, it would allow users to play a version of it for free. This new way of thinking enabled us to expand the addressable market massively.
Know what you don’t know
There’s a transition from being an entrepreneur with an idea to one who’s running a business. It’s a really big shift.
You need to learn how to manage people, be a leader, and gain many other skills.
At the same time, you need to think about the future. If you’re an ‘ideas person,’ then you need to learn to pay attention to the details. If you are impulsive, then you need to learn to plan for what’s around the corner.
Read up and find useful resources
Many successful entrepreneurs have never had time to do an MBA and, to a certain extent, it may not be useful for what you’re doing.
The important thing is to be cognizant of your weaknesses and find ways to make up for them. It’s important to read a lot and look for useful resources. You should also absorb other people’s lessons and, of course, build a team that complements your strengths.