This article first appeared in City & Country, The Edge Malaysia Weekly on March 6, 2023 - March 12, 2023
Jerry, the affordable co-working space under co-working space provider Colony, continues to expand its presence this year. Since its maiden venture in 2021, it has been operating in Taman Tun Dr Ismail (TTDI), Sri Hartamas and Damansara Heights in Kuala Lumpur and SS2, SS15 and Damansara Uptown in Petaling Jaya, Selangor. Its latest offerings this year are in Kuchai Lama and Wangsa Maju in KL.
According to Colony and Jerry co-founder Timothy Tiah, the two brands have separate branding and positioning elements. Colony is service-oriented and focuses on customer service, while Jerry is entirely automated.
“We believe there is a market for co-working spaces for both high-end and affordable demand. [Many co-working spaces are] not making money because they operate at the medium-end, which is very price sensitive and, therefore, there is always a price war,” Tiah tells City & Country in an interview.
“We had the idea before the MCO (Movement Control Order) because we wanted to cater to two different market segments. We saw the opportunity for the mass market but we wanted it to be much cheaper than the mid-end ones.
“Co-working spaces at an affordable range is a volume game. The more outlets we open, we can make a profit ... We need economies of scale to make money.
“We built the software, which cost a few thousand ringgit. [Potential clients] can view the units online. It is essentially a virtual tour — pay online and we will send you the passcode to go into the office. Everything is automated, it is a no-fuss model. We believe if we make it cheap and flexible enough, people will use it.”
He points out that with inflation and a potential recession, many businesses are trying to cut costs and avoiding long-term commitments. With these concerns, Jerry fits the bill.
“At Jerry, for example, a four-man team will cost RM1,200 a month. But if you rent a 1,000 sq ft office in a good location, it will be RM4,000 to RM5,000 per month, excluding utility fees, and you will need to sign a three-year lease. Also, at co-working spaces, you can cancel anytime. So, we are cheaper and more flexible,” says Tiah.
“How we make it cheaper is that we take out a lot of things that people don’t need in the [Colony] model. For example, in good locations like TTDI, there are good office spaces that are expensive. So, instead of going to those office spaces, we go to the shoplots nearby. Instead of paying RM6 to RM7 psf, our rental is only RM1.70 psf.”
Further savings come from having no staff at the Jerry co-working space compared to Colony, where there is a need to station two to three employees at the office, which is an inventory holding cost, he notes.
“If no one rents the space, they [co-working operators] lose money and if the rate is cheap, it lowers their long-term yield — so, there is a catch. However, small spaces don’t lose money [as there is no staff and hence no inventory cost], and they actually break even or make some money because of the low rental,” says Tiah.
On the demand and supply situation at co-working spaces in Malaysia, he acknowledges that the industry was in an oversupply situation pre-Covid, but many players ceased their operations when the pandemic struck.
“Also, people don’t want to return to the office to work or don’t want to go into the office every day. Many people are looking for remote or hybrid work, so employers will have to accept it eventually. Also, the first big cost you cut is office space,” he says.
It seems that Tiah has been proved right as Jerry has seen higher revenue and price per person. Its revenue went up 600% year on year in 2022, while the price per person increased 67%. He is optimistic about the outlook for Jerry.
“The model is working so far. Our goal is that we want growth, at least to break even operationally. A recession means people may be cutting down on office space [and that is good for Jerry]. Inflation doesn’t really affect us because the utility rate is the same and we don’t have many employees at Jerry,” he says.
“As for Colony, we have four locations — two in KL city centre, one in KL Eco City and one in Mutiara Damansara. We are going to expand Colony this year, by opening an office in Setia Alam.”
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