Chinese shared office giant UrWork has partnered with a Shanghai-based rival to accelerate its growth drive, as Asia’s co-working space race continues to ramp up. The $1.4 billion, Beijing-based firm announced Monday that it has inked a joint venture agreement with Shanghai Fountown Entrepreneur Services, a co-working brand that operates 20,000 workstations across 25 locations in Shanghai, Beijing and Chengdu.
Through the joint venture, UrWork will augment its current network of 100 centres in 30 cities across China, spanning a total floor area of 300,000 square metres. Under the terms of the deal, the partners will collaborate on “locations, membership systems [and] vertical integration of resources across the value chain,” according to a statement by UrWork.
The announcement comes as leading co-working players in China and elsewhere in the region are scrambling to build out their networks of shared office locations as quickly as possible in a battle for funding and market share.
Shared Office Tie-Up Grows UrWork’s Platform by 25%
According to the statement, the UrWork-Fountown partnership takes the form of a share swap between the two companies, which a UrWork representative confirmed to Mingtiandi has already been completed. The deal creates a new joint venture, in which UrWork founder and CEO Mao Daqing will serve as chairman, while Fountown founder and CEO Wan Lijiang will take the role of CEO.
UrWork declined to provide further specifics about the structure of the partnership or the assets owned by the joint venture. Former China Vanke executive Mao Daqing stated that the deal would allow the companies to leverage their mutual strengths. “We are looking to drive stronger efficiencies and strengthen our brand asset,” said Mao in the statement.
Founded in 2015, Fountown provides creative spaces across three cities including a 26,000 square foot (2,415 square metre) facility in Shanghai featuring wood floors, artificial trees and monkey bars. Last September, the startup raised RMB 200 million ($30 million) from a group of mainland investors led by private equity firm CDH Investments in a series A round that reportedly valued Fountown at RMB 1 billion ($151 million). Gopher Asset Management and Huazhu Hotels Group joined Beijing-based CDH in the investment round.
Beijing Startup on Global Growth Drive
Backed by investors including mainland VC heavyweights Zhen Fund and Sequoia Capital China, UrWork has proven adept at securing funding to finance its rapid expansion. The company founded in 2015 reports a valuation of $1.4 billion as of August, making it the first unicorn, or billion-dollar firm, in China’s co-working sector.
UrWork has also been quick to forge alliances with competitors. In addition to the Fountown tie-up, the startup received a major boost when it merged with its biggest Chinese rival New Space this past May. The merger combined UrWork’s existing centres with New Space’s 30 flexible office locations across 13 cities, creating one of the largest co-working platforms in China.
UrWork has also launched an overseas growth drive, unveiling a centre in Singapore in June and partnering with New York-based Serendipity Labs to set up a Manhattan venue which is slated to open this year. The company says it aims to launch another 160 locations in 32 cities worldwide over the next three years, covering 7 million square feet.
WeWork Brings the Battle to UrWork’s Turf
UrWork may be betting that its rapid growth will help it fend off competition from rival players including New York-based WeWork, the world’s largest co-working firm which is targetting aggressive expansion in Asia.
The $20 billion American startup has recently raised $4.4 billion from Japanese tech giant SoftBank and its Vision Fund to fuel its expansion in China, Japan, South Korea and Southeast Asia. WeWork already has a dozen locations in Shanghai, Beijing, Hong Kong and South Korea and wants to roll out new centres in five additional mainland cities within a year.
The company is also jumping into the Japanese market, revealing this week that it plans to open three new centres in downtown Tokyo starting next February. UrWork has WeWork’s attention, as the American firm is suing its Chinese competitor in Britain and the US over its similar name, which WeWork says violates trademark. UrWork rejects the lawsuit and says it will defend its brand name.
SOHO China Also Covets Co-Working Scale
Adding to the growing co-working rivalry, commercial developer SOHO China is rolling out its own shared office brand across China’s second-tier cities. The company headed by Pan Shiyi and Zhang Xin announced on Monday that it would introduce its 3Q centres to East China’s Hangzhou and Nanjing, and is eyeing sites for additional centres in Changsha, Guangzhou, Shenzhen, and Wuhan.
SOHO currently operates 19 such centres in Beijing and Shanghai with a total of 17,000 seats. The South China Morning Post quoted Pan as saying that the shared office market in China is still largely untapped. “There should be hundreds of thousands, even million of seats in China,” he told the newspaper.
Shanghai-based naked Hub, which targets the upper end of the co-working market, has also emerged as a major competitor with ten centres in Beijing and Shanghai and a recently opened location in Hong Kong. The Gaw Capital-backed startup joined forces with Singapore’s JustGroup in July to create Asia’s largest premium shared office platform with 41 locations in total.