One of China’s top shared office players, URWork, has inked an agreement with rival New Space for a strategic merger, according to a recent joint announcement by the two mainland flexible office providers.
The market valuation of the combined companies is said to reach RMB 9 billion ($1.31 billion) and the companies together would immediately have a network of nearly 100 co-working centres across mainland China.
The two companies announced the merger at the same time that they noted the growing presence of US co-working giant WeWork in China’s flexible office market. Following the deal, the combined URWork-New Space entity says it plans to expand globally, taking on WeWork in Singapore and London, as well in the New York home of its US rival.
Aiming for 35 Cities Worldwide
While both URWork and New Space are mainland-only entities so far, the merged company hopes to take its co-working offering global with plans to reach 150 venues in 35 cities within the next three years, including centrex in New York, London, Singapore and Taiwan. The two companies say their expanded network is expected to cover at least 50 million square metres of space within that period.
Under the terms of the strategic agreement, URWork boss Mao Daqing is tipped to serve as chairman of the joint venture, while Mao and New Space chief Wang Shengjiang will serve as co-CEO’s of the as yet unnamed new entity. According to the joint statement, whilst resources will be shared under the strategic tie-up, each company will maintain their independent status with team structures unchanged.
Capital Injection Critical
In January, URWork announced the completion of 400 million RMB series B at a valuation of RMB 7 billion ($1.02 billion), the largest capital injection into the firm thus far. As of April, URWork has reportedly amassed a total venture fundraising of over RMB 1.2 billion ($175 million), according to TechNode. New Space was said to be valued at around RMB 2 billion before the agreement was signed.
The merger would combine New Space’s 30 locations in 13 cities with URWork’s chain of 66 centres in 18 mainland cities. Both companies were established in 2015, with Mao founding his venture after serving as vice president of Chinese real estate developer Vanke. Mao’s startup was initially backed by venture capital heavyweights including Sequoia Capital ZhenFund and Innovation Works. In later rounds, Tianhong Asset Management, a fund management affiliate of Alibaba’s Ant Financial, Junfa Group, Shanghai Chuanghehui, Tianming Shuangchuang Technology and Dahong Group have added to the company’s investor roster.
Survival of the Mergers
The URWork-New Space merger creates one of China’s largest co-working networks as companies jockey for market share. A report from international property consultancy JLL from January this year shows that between Beijing and Shanghai, more than 500 co-working sites have been set up since July 2015.
URWork itself has previously stated that it views “solid strategic partnerships” as critical to its success, and in December 2016 entered into a partnership with Singapore’s biggest developer, CapitaLand, to set up co-working centres in its mainland malls.
URWork’s interest in bolstering its market position was underlined in a separate announcement on its website, released the same day as the merger agreement, which traced the genesis of WeWork, noted the US company’s $17 billion valuation, and tracked the expansion of the US co-working giant’s presence in China.
After launching its version mainland centre in Shanghai in 2016, WeWork now has eight locations in China, including five in Shanghai and three in Beijing. Signaling WeWork’s growing ambitions, the company has sought to fill 55 China based posts over the last three months, according to Linkedin Jobs.