Soho China, one of the largest office developers on the mainland, is aiming for a 2019 Hong Kong IPO for its co-working spinoff Soho 3Q, according to a statement by the company, as investor interest and occupier demand continues to fuel China’s shared office market.
Soho chairman and co-founder Pan Shiyi plans to expand the WeWork-inspired business to more than 50,000 workstations by year-end 2018, up from around 30,000 desks currently, as it heads for a public listing, Pan said at a press conference in Beijing last week.
The mainland real estate celebrity, who runs Soho together with wife and business partner Zhang Xin, said that Soho 3Q will soon open an additional five Soho 3Q Centers, in Shanghai Chongqing, Shenzhen, Chengdu and Beijing.
Soho’s Shared Office Division Aim for Corporate Clients
Soho 3Q’s path to its IPO is being made possible in part by what could be some of the industry’s biggest leases of shared space.
“At present, many large enterprises have signed leases for 30,000 or 40,000 square metres,” Pan said at the event, according to an account in the People’s Daily, adding that, “At this rate it’s estimated that we will have reached 50,000 workstations by the end of this year.”
Pan did not specify which companies were signing agreements for spaces of this scale, which would be the equivalent of at least 20 floors in some of China’s largest office buildings.
Soho, which rose to prominence selling strata-title offices to mainland investors attributed Soho 3Q’s growth potential to the business’ shift from a start-up focused vision when it was founded in 2013, to servicing enterprise users.
“Because the turnover and failure rates for startups are very high, our tenants go beyond startups to include large and medium-sized enterprises, who we can support with customised services including office fit-out, design and networking,” Pan said.
Among the companies already leasing space from Soho 3Q, according to Pan, are media companies Sina, Trends Group, Xiao Hong Shu and Meituan, as well as online design startup Tezign.
The shared office platform now operates 79 centres in 12 mainland China cities, Pan said.
Shared Offices Draw a Crowd
Soho 3Q’s mainland expansion drive is likely to ramp up the company’s competition with rivals naked Hub, Ucommune and Alibaba-backed Kr Space,
Kr Space initiated an overseas expansion in May, renting seven floors of the One Hennessy building in Hong Kong, slating a 2019 grand opening.
Beijing-based Ucommune, formerly known as UrWork, in March completed its acquisition of Woo Space, just two months after it purchased rival New Space. Ucommune claims a valuation of $1.7 billion and may be competing with Soho 3Q in the race to a Hong Kong IPO, with founder Mao Daqing saying last month that he was considering a Hong Kong listing for the shared office provider, without specifying a time frame.
Industry giant WeWork is also stepping up its game on the mainland after acquiring Shanghai-based shared-space operator Naked Hub in April for a reported $400 million. After the buy out, WeWork co-founder Adam Neumann publicly contemplated having “a community” of one million members in greater China by 2022.
Mainland Co-Working Continues to Boom
By industry estimates, co-working space in China will reach 51 million square meters by 2019, and Cushman & Wakefield recently reported that larger companies, even such giants such as Amazon, Paypal or Accenture, are occupying shared space in the region’s high-cost cities.
In a recent report the property consultancy attributed the industry shift in part to tenants seeking to lower occupancy costs (due to shared conference rooms, facilities and common areas) and in part to network or satisfy employee preferences.