The world’s largest co-working space provider is on the verge of pushing much further into China in coming months, WeWork Asia’s managing director said in Beijing ahead of the Wangjing branch opening. This came the same day as the company announced its acquisition of Singapore’s Spacemob as part of a $500 million expansion plan in Southeast Asia. Both announcements come only two weeks after the company received $500 million from SoftBank and Hony Capital for its China war chest.
WeWork’s seventh mainland China location, in Wangjing, is almost ready to open and has seen the fastest take up of rental out of any of the company’s buildings anywhere in the world. Almost 1,500 workers will move in in one day. After the company’s arrival in China a year ago, this will be the third location in Beijing, while Shanghai, the regional HQ, currently has four with two more locations under way. There are two locations in Hong Kong at present.
“We’ll definitely go a lot deeper in Beijing and Shanghai and Hong Kong. The product is much more valuable the deeper you get into a city. You have more of a community,” WeWork Asia Managing Director Christian Lee told TechNode. “There is the next set of cities in China that are incredibly important, whether it’s for Chinese startups, large Chinese companies, or companies coming into China. So for sure Shenzhen and there’s probably a list of three or four other cities that we’re actively exploring. So I think you’ll see us in another five cities in the next 12 months.”
However, the goal is not just to saturate Chinese cities with stylishly furnished break out areas and easy-to-use coffee machines. According to Lee, success is about “how many companies, not how many buildings.”
Right up to today, WeWork has been on an investment spree with deals worth hundreds of millions of dollars across Asia. Today they announced a $500 million plan to expand into Southeast Asia and South Korea, which includes the acquisition of Singapore’s Spacemob. On July 26, WeWork announced a deal with Japan’s SoftBank and China’s Hony to create a $500 million war chest for China expansion, after previous injections of $300 million and $430 million from SoftBank. WeWork is creating a joint venture with the investment fund in Japan, while it has formed separate entities for China and for Southeast Asia.
The Colliers International APAC Flexible Workspace Report 2017 states that: “Appetite from operators for new centers is stronger than ever and we should see 30% growth in take up year on year. With changes in the way people work, there appears to be strong end user demand to underpin this growth.”
And it’s China that is proving the most welcoming. “[Our buildings in China] are getting to 90-100% occupancy almost faster really than anywhere else in the world,” said Lee. “There is an incredible amount of demand for this kind of space.”
Local competition? Not a problem, according to Lee. “We don’t really think about the local co-working market to any great length. We really look at what we’re building as a global platform and there’s no one today that has the global learning we have, in terms of design and global community—that’s what we give to our members.”
The company now has around 170 employees in China, where it uses the same approach to getting a local perspective as everywhere else in the world. “When we started we sent three people from WeWork over and their main mission was to hire a local team: local community team, local designers, local real estate team to really help us navigate China from a local perspective,” said Lee.
“We’ve had to tailor. China is much more mobile-centric than other countries are so our app and how we integrate with WeChat, Alipay is different. Meetings tend to be much larger than meetings in the United States. With every building we open, we’re getting better,” said Lee.
The work spaces are proving useful to foreign companies trying moving into China. Around 70-80 percent are local Chinese members, with 20-30% international members tending to be enterprise members. In terms of being able to continue to support clients within a global platform as China tightens its requirements for data handling and access to foreign networks, Lee remains bullish. “We have a very large team of lawyers to make sure everything is working okay,” he said, adding that the local team includes provision for government relations.
While co-working space operators in China struggle to turn a profit, WeWork would only go so far as to say: “We don’t break out financials. When you look at the investors that we have—Softbank, Hony—they clearly believe that there is significant potential for this business and we think that there is significant potential in China.”
The company’s efforts seem to be paying off. An international user of one of WeWork’s other Beijing locations, Guanghua Lu, was very positive about the firm’s setup in China.
“Rent is going up in Beijing quite a lot so we’re actually saving RMB 60,000 by moving into WeWork as it’s all bundled—there are no unknown costs of printing, electricity, internet. It’s all the best of everything, the best printers, the fastest internet,” Sarah Keenlyside, founder of the Bespoke Travel Company told TechNode. “Coffee is included, and Jing A beer—it allows me to offer my staff benefits without that being an out-of-pocket cost. It even makes accounting easy as it’s literally just one cost.
“[Operating in Beijing has] been quite difficult. There are always problems with the internet in China, there’s often little technical hitches. When you’re a small company it wastes a lot of your staff time. WeWork does all that for you.”
On whether there’s any noticeable localization, Keenlyside could only think of the local touch added to the free TGIM (Thank God It’s Monday) breakfast: baozi, jiaozi, noodles and zhou are on offer. It’s the international element that is more important. “Being able to use any WeWork all over the world, that is just an incredible benefit for a small company. We’ve just expanded to Tokyo and they should be there before Christmas. The fact I can use that space in Tokyo is a massive benefit and so much cheaper than trying to rent somewhere,” said Keenlyside.
“For a company like us that wants to be an international company like them, the fact that we can grow along with them is really exciting.”