WeWork to leverage mainland partners to fend off rising competition in China market
Hony Capital, a key investor in the co-working space provider, says Chinese sentiment on US investment is recovering after Trump’s call to Beijing
The New York city headquartered co-working space operator WeWork will focus its China business in Hong Kong, Shanghai and Beijing in the near future while leveraging the connections and networks of its local partners as a means to fend off aggressive domestic competitors, its co-founder said.
“The copycats are interesting because some of them branded themselves as ‘WeWork of China’, which helped establish us before we were there,” Miguel McKelvey, co-founder of the “unicorn” valued at around US$17 billion last year, said during the opening ceremony of its space in Hong Kong’s Causeway Bay district on Thursday.
“More people and businesses are moving in this direction...we are making our products the best,” he said.
In addition to the two locations it currently owns in Hong Kong, WeWork is slated to open its first Beijing location in May, and another two in the Chinese capital in the near future. It also plans to bolster its two existing locations in Shanghai with three more work spaces in co-operation with its Chinese investment partners, which include property developers.
John Zhao, chairman of mainland private equity fund Hony Capital, one of WeWork’s key investors, said sentiments for investing in the US were recovering as concerns eased after US President Donald Trump talked to China’s leadership. Zhao added that he believes cross-border investment from China to the US would increase rather than be dampened.
A consortium led by Hony Capital, joined by its parent company Legend Holdings, Shanghai’s Jinjiang hotel group, and two property player Oceanwide Group and Greenland Holdings, invested a total of US$690 million in WeWork last March, securing a boardroom seat after the investment.
“The founders realised very quickly that their company should be both global and local. Now through our connections, Hony has brought in some very powerful local partners,” Zhao said.
Japan’s SoftBank Group is weighing an investment of well over US$1 billion in the company, the Wall Street Journal reported in late January. However, WeWork executives didn’t confirm the report during Thursday’s media interview.
“Right now we don’t have anything to announce [about fund raising], but it’s something we’ve always been considering. As for going public, we are certainly preparing for it internally, but we have no time frame,” said McKelvey.
Ole Ruch, managing director of Asia and Australia for WeWork, said occupancy rates for their space was very high, reaching 90 to 95 per cent in mature markets. He added that the company would open new space in India soon.
However, competition from home grown co-working spaces in China is heating up, with rivals basing their business models on to WeWork’s approach, while competing with lower prices and integration with local start-up incubators like Kr Space.
In early November Prometheus Capital, a private equity fund founded by Wang Sicong, the son of China’s richest man Wang Jianlin and backed by IDG Capital Partners, announced it had invested a combined 200 million yuan (US$30 million) in Kr Space, a co-working space spinoff from technology media and entrepreneur service company 36Kr.
36Kr is backed by Ant Financial, which is part of Alibaba Group, the owner of South China Morning Post.
The sharing economy business is forecasted by PwC to be worth US$335 billion by 2025, up from around US$15 billion in 2016.