WeWork pushes into China as rivals compete for co-working space

Updated 2018-02-08 15:47:05

Shared workspace giant WeWork announced Tuesday it would expand further into China, taking on domestic rivals like UrWork in one of the world's most lucrative startup sectors.

The New York-based company, which was valued at around 20 billion U.S. dollars last year, will establish co-working spaces in eight Chinese cities, after establishing a presence in Beijing and Shanghai over the past two years.

The expansion will see WeWork set up shop in startup hub Shenzhen, as well as second-tier cities Xi'an, Suzhou, Hangzhou, Xiamen, Chengdu, Nanjing and Wuhan.

The company, which already has office space in 66 cities worldwide, will also open its first site in Hong Kong's Lan Kwai Fong district.

The focus on the Chinese market can be seen as a bid to tackle fast-growing Chinese rivals on their own doorstep, as companies like Beijing-based UrWork expand in Asia and further afield.

The concept of co-working and office sharing is simple. Companies like WeWork take over empty and often quirky buildings, converting them into workspaces that can be used by small startups, freelancers and entrepreneurs.

Companies who use the space can also benefit from health insurance plans, networking events and social gatherings organized in the shared space.

Coworking has boomed to the extent that unicorn companies like WeWork and UrWork have emerged, with their potential attracting massive investment.

In August, Japan's SoftBank pumped 4.4 billion U.S. dollars into WeWork, earmarking 1.4 billion U.S. dollars for the company's expansion into Asia. That came one month after WeWork China was established as a standalone entity, backed by 500 million U.S. dollars in capital.

WeWork has already established 12 shared workspaces in Beijing and Shanghai, and plans to open its biggest ever location in Shanghai's Xintiandi this year, in a space covering 10 stories.

Despite its financial backing, WeWork's expansion in China will face stiff competition from domestic rivals. UrWork has been valued at around 1.5 billion U.S. dollars, and is already present in 33 first-, second- and third-tier Chinese cities.

Backed by Alibaba Group and Sequoia Capital, UrWork's plans to expand overseas has already seen offices open in Singapore and California, with new locations lined up in London, New York and Southeast Asia.

According to TechCrunch, UrWork is looking to move into 35 global cities in the next three years, and has allotted 500 million U.S. dollars' worth of funding for the Southeast Asian market, investing three million U.S. dollars in Indonesia.

Talking to the Financial Times, UrWork chief executive Ma Daqing has previously said that his company differs from WeWork because it focuses primarily on helping Chinese startups and companies, and its growth overseas is aimed at supporting Chinese entrepreneurs expand in foreign markets.

Nevertheless, a lawsuit launched by WeWork against UrWork in the U.S. last year established the two companies as rivals. WeWork objected to UrWork's name, suggesting it was too similar to its own brand.

WeWork won the case, meaning UrWork will have to operate under another name in the U.S. A statement from WeWork called it an "important victory," while UrWork vowed to continue its expansion in the U.S. despite losing out in court.

Beyond UrWork, WeWork also faces competition from naked Hub, another China-based rival that is focusing heavily on the Southeast Asia market.

At the end of January the naked Group bought a 70-percent stake in Australian co-working company Gravity, as part of the plans to expand to more than 200 locations in Asia and Australia in the next five years.

According to Reuters, naked Hub has 46 locations in China and Vietnam, and is on the edge of sealing a 175-million-US-dollar fundraising round prior to a possible flotation on the Hong Kong stock market.

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