SHANGHAI (Business Times) - WeWork, the global workspace solution provider, facing a cash crunch, is in negotiations with SoftBank who has proposed a financing solution that would leave the investor with a greater than 50 percent stake in the company. Many recent domestic and foreign players are trying to solve the equation of workspace sharing in China in this competitive industry.
However, the lure of co-working industry success within the China business market remains attractive.
Bringing Convenience to Chinese Entrepreneurship
If you search for office rental in the Chinese market, you are likely to encounter a real-estate rental website, Haozuwang, that covers rentals business in 26 cities in China. Beside the column of common rent is the column of co-working rent, where thousands of offices appear. Photos show offices ranging from 10 to 1000 square meters, decorated in modern architecture styles that are available to individuals and corporate clients alike.
“As opposed to having the headache process of dealing with office facilities on your own,” says Chinese entrepreneur Jack Ding. “Nowadays as soon as you walk in these co-sharing offices, you can start to work right way.”
On October 12th, WeWork China head office in downtown Shanghai. Requests for interviews by Business Times were not returned by deadline.
Ding was fascinated by the co-working business trend and said he deeply studied its development in China over the past two years. He observes that when co-working business trends started to become a popular fashion in China, led by WeWork, the number of small-scale entrepreneurship in China was escalating as well.
“Co-working places perfectly feed these start-up companies’ need to retain integrity despite being small in scale.” Ding says.
Local brands compete against international firms with names like Mixpace, Kr Space, DoBe, Funwork, SOHO 3Q, P2, UCOMMUE, mydream+, Distrii, ATLAS, and many Chinese domestic co-working brands are thriving. Many of these co-working business websites claim that the office solution model has business advantages to efficiently re-purpose unoccupied offices to meet high demand.
However, the China Real Estate Development Report, released by Chinese Academy of Social Sciences in May of this year, predicts that the average rate of unoccupied offices in the 17 Chinese 1st- and 2nd-tier cities will reach 20% percent by the end of 2019. 15 cities in China will be having increasing rate of unoccupied offices year-on-year.
In the light of escalating real estate development over the recent decades, co-working businesses seek to solve the surplus of empty office spaces, while facing public accusation for playing the role of secondary landlord. It is a challenge for many co-working business to discover an equation for sustainable profits.
Market Sees High Points and Pitfalls
Located 300 meters away from the populous downtown region around Zhongshan Park in Shanghai, Mixpace, a recent hotspot among Chinese domestic co-working brands, manages a three-floor building with the lower two floors are rented out to small-scale restaurants, cafes and a gym studio. The top floor, with co-working space for individuals and companies, comprises only 66 seats, with a minimum lease of six months.
Aside from mixing shopping and co-working offices, this brand is also well-known for having unique architectural style in its each location, which has become popular for by-passers who frequently take pictures and is attractive for young Chinese entrepreneurs and white-collar professionals to work in.
On October 11th, the three-floor building managed by Mixpace in downtown Shanghai fitted out its top floor as co-working space.
Only 900 meters from Mixpace is yet another booming domestic co-working brand, Kr Space. Occupying four floors of a high-rise office building, Kr Space rents one entire floor to Amazon and another floor holds Global Times, an English-language daily newspaper.
Started as an incubator in Beijing Zhongguancun Technology Park in 2014, Kr Space now has nearly a dozen locations across the nation. However, by the end of 2018, the company was experiencing turmoil.
A previous Kr Space employee, under condition on anonymity, revealed that employees’ annual bonus was canceled at the last minute at the end of 2018. She indicated that Kr Space’s investment also reflects the closing of five locations across the nation and even the location in downtown Shanghai’s thriving Central Plaza was sold rapidly to Mixpace.
“Kr Space was trying to copy WeWork’s form at the beginning,” says the previous Kr Space employee. “However it remained a mystery about the core value of WeWork’s social community.”
When Chinese domestic brands find difficulty to adapt WeWork’s business model into the Chinese market, an essential question is raised. Aside from playing the role of secondary landlord, what value do co-working spaces offer?
What Value Can A Co-working Space Offer?
“The goal of creating a co-working space is not to make money,” says Steven Shi who was born in 1994 and studied in the U.S. and Israel. In his newly-opened co-working space, Mobee Build, which offers 700 square meters decorated in artsy style, some private artistic events have taken place.
The venue sponsored activities involved with the most recent Shanghai 48 Hour Film Project. These are the sort of creative professionals Mobee Build needs to attract. A creative professional learned about the venue from participation with the video artists and it lead to a short term lease of co-working space.
On October 12th, Steven Shi introduces his futuristic egg-shaped conference room in Mobee Build.
In the center of the venue is a large white futuristic egg-shaped conference room, where a video is showing three Mongolian musicians playing modern rock music on traditional Mongolia instruments. Deep inside this rectangular space is hidden a self-serve kitchen and a 20 square-meter room as a music practice space rented to individual musicals.
“I hope to provide an environment like home for the people working here.” Steven says. “Young entrepreneurs in my generation want to pursue love, freedom and dream, for which I hope my space can serve.”
Entrepreneurial culture is still developing in China and the potential for reduced costs of entry with shared workspaces can be part of the equation. Meanwhile, co-working providers still seek a more sustainable business model.
