Shar­ing of­fice space

Co-work­ing cre­ates new cul­ture in cities

China Daily (Hong Kong) - - FRONT PAGE - By WU YIYAO in Shang­hai wuyiyao@chi­

Th­ese days, “Shang­hai 189 Lane”, CITIC Cap­i­tal’s col­or­fully dec­o­rated and brightly il­lu­mined seven-story shop­ping com­plex in down­town Shang­hai, sees an end­less stream of young peo­ple en­ter­ing and ex­it­ing, morn­ing till late night. The year-end win­ter chill is no bar for them — but Christ­mas shop­ping isn’t what they are here for.

They are the city’s en­trepreneurs and self-em­ployed pro­fes­sion­als, out to view the floor plans of the top two sto­ries of the com­plex.

That’s where lots of co-work spa­ces have been in­stalled of late. Shang­hai 189 Lane is one of the 200odd co-work space sites that have mush­roomed across the city.

Zhang Yue­qiang, a startup co-founder who is ex­pect­ing to launch a vis­ual re­al­ity con­tent de­sign out­fit soon, said: “I’ve vis­ited 18 sites in Shang­hai in the last one week, and I’m think­ing of mov­ing into one of them at the be­gin­ning of 2017. Some are of­fer­ing dis­counted rates at the year-end. But my co-founder said we should visit some more as there are plenty of choices now.

“We need to choose the most cost-ef­fec­tive one, tak­ing rental, lo­ca­tion and ser­vices into con­sid­er­a­tion.”

Con­ve­nient, flex­i­ble and af­ford­able, co-work spa­ces have be­come the first choice of many star­tups, free­lancers, in­de­pen­dent play­ers and self­em­ployed pro­fes­sion­als on the look­out for of­fices in Beijing and Shang­hai.

Ac­cord­ing to a re­search note by JLL, a real es­tate ser­vices provider, the num­ber of co-work spa­ces in Beijing and Shang­hai has jumped to over 500 from no more than 10 just five years ago.

A re­search note from Shang­hai-based Ruiyi Con­sul­tancy Ltd said the co-work space mar­ket by floor space grew 71 per­cent an­nu­ally on av­er­age from 2007 to 2015, and is pro­jected to grow 68 per­cent an­nu­ally from 2016 to 2018.

Com­pa­nies from dif­fer­ent fields such as real es­tate (UR Work, Soho 3Q), hos­pi­tal­ity (Naked Hub which owns sev­eral re­sorts and ho­tel sites), and me­dia (KrS­pace) have en­tered the co-work space mar­ket and ex­panded quickly.

That’s not all. For­eign brands in this seg­ment like WeWork from the US are try­ing to meet China’s ris­ing de­mand for co-work spa­ces.

WeWork re­ceived $430 mil­lion in fund­ing from China’s Leg­end Hold­ings. The lat­ter’s pri­vate eq­uity arm Hony Cap­i­tal val­ued WeWork at more than $15 bil­lion.

WeWork has opened two co-work sites in Shang­hai. It is pre­par­ing to launch a third one now, and is also ex­pand­ing to Beijing.

Mao Daqing, founder of UR Work, said his co-work space brand aims to in­crease the num­ber of its sites from 40 across 10 cities by this yearend to 60 in 2017.

Naked Hub an­nounced in late Novem­ber that it will ac­cel­er­ate its re­gional ex­pan­sion and en­hance its prop­erty re­sources via Gaw Cap­i­tal Part­ners, aim­ing to add up to 30 new lo­ca­tions, or about 150,000 square me­ters and 30,000 mem­bers across the Chi­nese main­land, Hong Kong, and other key cities in Asia.

A re­search note from CBRE on in­no­va­tive sec­tors’ leas­ing trends said that China’s small en­ter­prises and star­tups are fa­vor­ing co-work spa­ces be­cause their cost is “lower” and their at­mos­phere ap­peals to young tal­ent, par­tic­u­larly those work­ing in the TMT (tech­nol­ogy, me­dia and telecom­mu­ni­ca­tion) space.

Sam Xie, re­search di­rec­tor of CBRE China, said in­no­va­tive tal­ent tends to work at sites in con­ve­nient lo­ca­tions. And when they work to­gether, they can form a “clus­ter”.

“Co-work spa­ces are meet­ing th­ese de­mands, so they are in­creas­ingly fa­vored,” said Xie.

Ten­ants have other con­sid­er­a­tions” too, said real es­tate agents.

Feng Yunxi, a real es­tate agent with Shang­hai-based Fengx­i­ang Real Es­tate Co, said: “In­no­va­tion and en­trepreneur­ship have be­come a na­tional as­pi­ra­tion. An in­creas­ing num­ber of star­tups are emerg­ing. All of them need a de­cent space to op­er­ate from. They can ac­tu­ally work from their homes or even rented res­i­den­tial flats to save on costs.

“But they are look­ing for a com­mu­nity, where they can feel that they are not alone, where they can get re­sources, such as busi­ness op­por­tu­ni­ties from other ten­ants, on short-term lease ba­sis. That’s so be­cause star­tups do re­al­ize there’s no cer­tainty they will sur­vive in the long run and thrive. If they do, they may need to move to a larger of­fice.”

That would be a risk though, from the space provider’s per­spec­tive. Whether ten­ants’ busi­nesses suc­ceed or fail, they would even­tu­ally likely move out, leav­ing the of­fice desks empty. So, op­er­a­tors are evolv­ing new strate­gies to make their own busi­ness vi­able in the long run.

In ad­di­tion to star­tups and free­lancers, mid-sized and large en­ter­prises are also be­ing courted by co-work site op­er­a­tors.

“Co-work spa­ces may no longer be an ex­clu­sive zone for small busi­nesses. Op­er­a­tors’ huge in­vest­ments need a stable turnover. So, a bal­anced ten­ant port­fo­lio be­comes nec­es­sary to hedge risks.

“In the US where co-work spa­ces first emerged, and in Hong Kong where co-work spa­ces are com­mon, big­ger busi­nesses such as banks and tech­nol­ogy com­pa­nies have moved some of their teams to co-work spa­ces.

“The younger gen­er­a­tion among their staff pre­fer such at­mos­phere and some cre­ative arms of es­tab­lished busi­nesses may not find a fixed seat com­fort­able and suit­able. I think in the Chi­nese main­land, more co-work spa­ces will al­lo­cate more re­sources to big­ger ten­ants in the fu­ture,” said Ken­neth Rhee, CEO of Huhan Busi­ness Ad­vi­sory (Shang­hai).

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