Chinese co-working giant battles with US rival to dominate Southeast Asian market
The co-working unicorn will compete with US giant WeWork in the region through its investment in Indonesian start-up ReWork
UrWork, a major shared work space provider in China, has taken its rivalry with US giant WeWork into Southeast Asia by financially backing an Indonesian start-up.
Beijing-based UrWork took part in an early round of funding that raised US$3 million for ReWork, which will use the cash to bankroll its expansion from Jakarta to the island of Bali. The fundraising was led by ATM Capital and Indonesia’s Convergence Ventures.
With 88 locations in 25 Chinese cities, UrWork is one of China biggest players in the co-working field. A recent round of financing valued the company at US$1.5 billion. It is a direct rival of the American giant, WeWork, which recently made its own foray into Southeast Asia.
“As Chinese co-working companies look overseas and move to cater to medium-to-high end tenants, such changes will inevitably pose challenges to WeWork,” said Yu Kexin, an analyst iResearch.
As it launches eight new locations at home, UrWork aims to move into 32 cities worldwide, setting up 160 shared workspaces over the next three years, according to a statement posted on the company’s website.
The decision came around the same time that WeWork announced its plan to acquire Singapore-based SpaceMob as part of a US$500 million investment in Southeast Asia and South Korea.
UrWork, with its continued fundraising and overseas ambitions, has been seen as a threat to the US unicorn as it doubles down in the world’s second largest economy.
The co-working sector has taken off in China over the past three years, thanks partly to the country’s efforts to promote entrepreneurship. According to iResearch, the market was worth 4.29 billion yuan at the end of 2016. Rent generates 80 per cent of income for space providers and added incubation services and government subsidies another 10 per cent each.
“The co-working sector is still in its infancy in Southeast Asia. Global partnerships will enable companies to learn from mature operating models and provide extensive services to tenants,” said Yu.
ReWork currently works with property owners on a revenue-sharing basis, but is in talks with larger real estate firms over joint ventures as it eyes rapid expansion, according to a report carried by TechCrunch. The company is looking to expand into major urban markets including Bali and Bandung.
However, the markets in Southeast Asia may still need time to pick up steam, despite the region’s start-up boom and fast-growing economy, said Chen Xi, founder of Xspace, a start-up based in Manila specialising in providing shared workspace to Philippine Chinese people.
“Co-working is more like an extension of the real estate industry,” Chen said. “In reality the Southeast Asian market may be even more sophisticated than the one in China because of the complicated human relationships and investment constraints.”