Just four years ago, co-working spaces were a rarity in China. Propelled by a series of favorable policies and trends, hundreds of thousands of operators have flocked to the emerging market. Local tech media has said that there are over 2,300 co-working operators in the market as of early 2016. After this stunning growth, however, we can now see the inevitable overcapacity problem, leading to major consolidations in the market since the beginning of this year.

“Over the past years, co-working boomed, but the supply has definitely exceeded the demand. The demand is coming up but not as quickly as the supply,” said Liu Lei, founder and CEO of Sandbox, one of the few free co-working spaces in Shanghai. “Having an open community and the belief that anyone can adopt this lifestyle is how we built our demand.”

Why An Open Community?

“In co-working, we sell the community. The key essentials for the community is a group of people that understand each other’s commonality, they share values, interests, and sharing the same space is the fundamental commonality a lot of these people have,” said Liu.

While commonality is easy for most co-working communities to achieve given their word-of-mouth marketing, Liu pointed out that diversity, another essential component that defines a prosperous community, is missing in most of China’s co-working spaces due to the closed nature of their operation.

“I went to a major co-working brand in Shanghai just to look around. There was a glass door, I stand outside the glass door for almost 30 minutes like an idiot and couldn’t get in until the reception opened the door for me,” he said. “The first thing she asked is whom I am here to see. When I told her I just want to take a tour around the facilities, she brings the salesman who inquires on what kind of space I want.”

While noticing that the whole space is 70% empty, Liu wondered why they still kept their doors shut rather than open it up to people who are willing to use it and allow more diversity to flow in.

“With an open community, what happened is your open portion of the room allows diversity to come in, allows people to come for maybe just a cup of coffee, maybe just for the meeting room, or meet a friend or two,” he said. “Those people could be your potential customer, guest’s customer, future suppliers, or partners. That inflow of diversity is essential for a community. We want to have an inflow of different kinds of people. We call it ‘fresh blood’: every day you end up seeing a portion of people you have never seen before. That gives you an opportunity to know them.”

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Freemium Model Pays Well

Being known for providing rental-free spaces, people may easily wonder how Sandbox makes money.

The company seems to have been paid well by building an open community. A four square meter meeting room with the maxim of 5 seats and one round table in Sandbox’s Zhangjiang location is priced at 50RMB per hour.

“In October, from just that one room we generated 6750RMB (971 USD). That’s 57 RMB per square meter per day, much higher than retail space on Huaihai Road [a popular shopping street in Shanghai],” he said.

Hands-off Approach for Running A Space

Sandbox started just a year ago as the odd man out: completely free to use the public space and very few staff. When you walk around Sandbox, you can’t see any senior staff who control the community, just a few trainees or some young hipsters willing to help you out when needed.

“Everything build online because we want to build a space that manages itself. We don’t put in much effort to control the community,” said Liu. “We rarely host events. All the events held in Sandbox are organized by our community members. We provide the space and things just take happen.”

Image credit: Sandbox