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WeWork has opened locations in Hong Kong but chose Shanghai for its regional headquarters. Photo: Edward Wong

Co-working office providers flock to Shanghai, Beijing

Providers of flexible office leasing concept target growing market demand from start-ups, freelancers and small businesses

There wasn’t much talk about shared office space in Shanghai one year ago.

But in the interim period, a number of operators and developers have set up co-working office space leasing concepts featuring a chic environment, modern furniture and smart services. The new arrivals include New York-based WeWork, the biggest player in the co-working industry.

Shanghai-based Thepaper.cn reported last week that WeWork plans to set up its regional Asia-Pacific headquarters in the city.

A unicorn startup with 7 million square feet leased in 12 countries, WeWork entered China earlier this year and chose Shanghai as its first stop. The company has secured three locations in the city.

A spokesperson denied the report, saying it is only the company’s flagship store in China.

“In Shanghai, currently we have the Yanping Lu location operation at full capacity. We are going to open Weihai Lu and Yunnan Lu locations very soon.

“Weihai Lu is our China flagship location. We are also looking at other opportunities in other big cities in China, ”she said, declining giving more details.

“Shanghai has the largest office stock in China, which means Shanghai has the highest concentration of companies/businesses. Shanghai is also the financial centre of China. Even for small businesses or start-ups, access to capital is vital to their success,” said Joe Zhou, head of research at Jones Lang LaSalle in China.

Interior of WeWork in Causeway Bay on August 31, 2016. Photo: Edward Wong

While WeWork also expanded into Hong Kong in August, David Ji, head of research and consultancy for greater China at Knight Frank, believes the cheaper rental is the key reason WeWork decided to base the business in Shanghai.

“Office supply in Hong Kong is very scarce, the share-based office cost wouldn’t be lower than traditional office space, ” he said.

Meanwhile, co-working space has also grown significantly in Beijing. Between the Chinese capital and Shanghai, more than 500 co-working sites have been set up over the past 18 months, JLL data shows.

UR Work, a Beijing-based co-working space provider founded last year, has seen its market value expand to 5.5 billion yuan following a series-B round of fundraising.

Of the 40 sites its has set up since its launch, about half are located in Beijing, while the remainder are spread across nine other cities.

UR Work has started strategic cooperation with Alibaba Cloud earlier this year, the cloud serviced arm of China’s Alibaba Group Holding. Alibaba will provide technical assistance to entrepreneurs using UR Work.

WeWork operates three locations in Hong Kong. Photo: Sam Tsang

Most recently, Longfor Properties, one of the largest mainland developers, also plans to open its first two co-working spaces, in Shanghai and Beijing, by the end of the year.

The company said it will use the spare spaces at its shopping malls and expects to see the synergies with retailers in the mall.

Dynamic economic growth in IT and finance and demographic changes, including the two-child policy, will create more opportunities for niche sectors such as co-working space to take hold, said Kenneth Rhee, the Urban Land Institute chief representative for the Chinese Mainland.

Companies are also switching on to the use of co-working spaces. “More large corporations are increasingly considering co-working options for some of their business units or functions,” JLL’s Zhou said.

However, Zhou doesn’t expect significant impact on demand for traditional office space, as the coworking community primarily caters to start-ups, freelancers and small businesses.

Zhou cautioned that the dramatic increase in coworking space could wind up increasing office supply, pushing down rental rates and eventually leading to a wave of consolidation.

“Coworking is not just providing space. The successful coworking operators offer a platform, a community and experience which we found their tenants value most,” he said.

This article appeared in the South China Morning Post print edition as: Co-working space operations take off in mainland
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