The battle for China’s co-working market has kicked into high gear, with New York-based shared office giant WeWork announcing it has raised $500 million for a new China unit.
Japan’s SoftBank and China’s Hony Capital are leading the investment in the new vehicle, called WeWork China, which will fund the brand’s expansion into at least five more major cities on the mainland, beyond its current network of six co-working centres currently operating in Shanghai and Beijing.
WeWork will hold a majority stake in the new entity, and will take charge of its management and operations. To drive its expansion in Asia, WeWork has shifted former Time Warner Cable exec Christian Lee from its New York office to run the new China operation from Shanghai.
The move by the $20 billion startup comes a week after WeWork said it was partnering with SoftBank in a joint venture to open a new centre in Tokyo by early 2018, while WeWork rivals including naked Hub, JustCo and URWork ramp up their own platforms in the region.
WeWork Taps Top Investors for Mainland Move
For its new push in China, WeWork is building upon existing partnerships with some of the region’s investment heavyweights. SoftBank Group, the tech giant that continues to build its reputation as one of Japan’s most aggressive investors, is said to have committed $300 million to WeWork this past March, and was reported to be planning a total investment of at least $3 billion in the company.
Hony Capital, the private equity arm of Beijing’s Legend Holdings, backed WeWork’s initial foray into Asia, leading a $690 million investment in the company in March of last year. In addition to SoftBank and Hony, WeWork’s new China vehicle is receiving backing from Shanghai-based developer Greenland Group and the parent company of state-owned Shanghai Jin Jiang International Hotels Group, both of which also joined the Chinese investment round last year.
Building a Bigger Platform in the World’s #2 Economy
WeWork launched its first Asian location in Shanghai’s Jing An district just one year ago. Now the company has a network of eight co-working venues in mainland China and Hong Kong, with seven more under construction, for a grand total of 15,000 desks in the country. Earlier this week, WeWork was reported to be eyeing a shuttered hotel in the Lan Kwai Fong nightlife district for its third Hong Kong centre.
According to WeWork CEO and co-founder Adam Neumann, the new China investment will enable the brand to expand into at least five additional mainland cities, beyond its current footprint in Beijing and Shanghai, within the next six to 12 months. The Manhattan startup founded in 2010 currently operates more than 155 centres in 16 markets around the world, but did not specify which Chinese cities might be next on its target list.
Charged with leading this Asian effort, Christian Lee, who joined the office platform in 2015 has been named managing director of WeWork Asia. The former head of M&A at Time Warner Cable will manage WeWork China’s operations from Shanghai. Lee has previously served in various leadership roles at the company including chief financial officer, and his experience raising capital for WeWork around the world should prove useful as it seeks to outspend its competitors.
One Co-Working Brand to Rule Them All?
WeWork’s China play comes soon after two of its top rivals in Asia joined forces to create a regional co-working powerhouse. Last week, as WeWork announced its planned centre in Japan, Shanghai-based naked Hub and Singapore’s JustGroup revealed they were merging to form the largest premium co-working platform in Asia.
The two startups, which see themselves as direct competitors to WeWork, now have a combined portfolio spanning 41 centres with 140,000 square metres of space across nine cities in six countries. The platform is expected to break $100 million in annualized revenue by the end of the year as it serves a clientele of 8,000 companies and 32,000 members.
naked Hub, which recently opened its first non-mainland location in Hong Kong’s Sheung Wan, is planning additional centres in Beijing and Hong Kong, and, through its JustCo merger, is expanding beyond Singapore to develop Southeast Asian facilities in Bangkok, Kuala Lumpur, Manila, Hanoi, Ho Chi Minh City and Jakarta. The fast-growing startup is backed by private equity investors including Gaw Capital, and is expected to raise $200 million through a new funding round as early as August.
The other major heavyweight in China’s co-working scene is Beijing-based URWork, the $1.3 billion startup founded by former Vanke executive Mao Daqing. With a portfolio of about 100 centres across mainland China following a strategic merger in April, the company is setting up its first non-mainland location in Singapore and plans to challenge WeWork on its home turf with a venue in Manhattan planned for October. The company is backed by mainland VC players Sequoia Capital China and Zhen Fund.