WeWork aims to cut rental costs through revenue-sharing leases … but can it persuade Hong Kong’s landlords?
- A revenue-sharing agreement would see landlords inject capital or lower their tenant’s upfront payment and in return take a share of the workspace provider’s income
- Some analysts think persuading Hong Kong’s landlords to abandon their fixed monthly rental income will be easier said than done
How do you keep costs down if you want to aggressively expand your business in the world’s most expensive office location?
US co-working space provider WeWork thinks it has the answer. It will try to persuade Hong Kong’s commercial landlords to enter into revenue-sharing arrangements as it takes up new locations.
If it is able to convince landlords to shift away from the conventional fixed-rent model, everyone stands to gain, according to Christian Lee, vice-chairman of WeWork Asia.
“We’ve adopted this scheme in other parts of the region,” said Lee. “Landlords maintain their control over the assets but bring in WeWork to run the building with them. When we talk to the landlords, we let them know that through [this type of] lease, we make more and they make more.”
A revenue-sharing agreement – or “participating lease”, as WeWork has chosen to call it – would see landlords partner with WeWork either by injecting capital or lowering their tenant’s upfront payment and in return, take a share of the workspace provider’s income. WeWork would also help to manage the building, if that formed part of a particular contract.