naked Hub, the Chinese flexible office provider, is joining forces with Singapore’s JustGroup to create Asia’s leading operator of high-end co-working space and compete with US giant WeWork, the companies announced Tuesday.
The merger of the two shared office players will create a 41-centre platform spanning 140,000 square metres of space under management covering nine cities in six countries, as the battle for the region’s co-working market intensifies.
The platform combining fast-growing naked and JustCo will be better poised to compete with regional rivals including Beijing-based URWork and WeWork, which announced this week it will build on its foothold in Greater China by launching its first Japan centre next year.
Asian Co-Working Players Join Forces
“This deal will bring together two regional powerhouses in the Asian co-working scene allowing us to break the $100 million run-rate revenue before the end of this year,” Grant Horsfield, founder of naked Group said in a statement. “naked Hub, with its hospitality background, proprietary and innovative technology and award-winning design, perfectly complements JustCo’s footprint in Singapore and its Southeast Asia know-how.”
The Shanghai-based startup, an offshoot of resort developer naked Retreats, has a network of 21 premium shared office locations across China, Hong Kong and Vietnam currently in operation or soon to be launched. The company opened its first centre in Shanghai in late 2015 and its first Beijing location last month.
naked has also recently expanded its network beyond the mainland with a new location in Hong Kong’s Sheung Wan. The company is planning further locations in Beijing and Hong Kong, and a Southeast Asian presence with centres in Bangkok, Kuala Lumpur and Jakarta.
naked’s growth is fueled by partnerships with real estate heavyweights including Gaw Capital, which led a $33 million funding round in the company last November, China Vanke and Minghong Group. Mainland investment bank China Renaissance will support naked’s Series C funding, which the company expects will raise $200 million as soon as August.
Joining With Singapore Standout
The company’s Singaporean partner, Just Group operates both co-working provider JustCo and serviced office company JustOffice. Kicked off in late 2015, JustCo is the largest co-working network in Singapore with nine locations in the city-state as well as two centres in Shanghai. The company backed by investors including Singapore’s Pinetree Capital Partners and French investment firm Tikehauim plans to strengthen its foothold in southeast Asia by rolling out an additional 185,000 square metres of space.
“A merger with naked Hub is timely and makes perfect sense, with JustCo spearheading further expansion in Southeast Asia and naked Hub taking care of North Asia, we will become the preeminent pan-Asian player in this space,” commented JustCo’s founder and CEO Kong Wan Sing in a statement.
Under the terms of the merger, Kong will oversee the company’s southeast Asian expansion. Kong said in an interview with Mingtiandi that the company is already targetting Jakarta and Manila, as well as having partnerships in place for Vietnam and Bangkok.
Merger Startups to Battle WeWork
naked and JustCo’s combined platform of 41 locations will host over 8,000 companies and 32,000 members, the companies say. Scale may prove an advantage in the accelerating fight for co-working dominance. Rival URWork, the $1.3 billion Beijing-based startup founded by former Vanke executive Mao Daqing, has about 100 centres across mainland China following a strategic merger with competitor New Space this past April.
On the mainland, URWork’s centres are said to charge approximately RMB 1000 per desk per month, while naked Hub’s China venues charge approximately three times that. URWork is also opening a new location in Singapore and has revealed plans to take on WeWork on its home turf with a centre in Manhattan planned for October.
But WeWork, the $20 billion unicorn from New York, may prove the biggest challenger to naked and JustCo’s newly forged platform. With a proliferating network of some 201 locations in 50 cities worldwide, WeWork has opened eight centres in Shanghai, Beijing and Hong Kong while building up its regional management team. The company also plans to bring its platform to Singapore, as Mingtiandi reported in May.
On the same day that the naked and JustCo tie-up was announced, WeWork said it had partnered with Japan’s SoftBank on a joint venture, WeWork Japan, that will open a co-working centre in Tokyo early next year. SoftBank invested $300 million in the US company earlier this year.