WeWork arrived in China in 2016, looking to the market as an attractive growth opportunity. Now with the halt of its U.S. IPO, its China business may face a cash crunch at a time when a charged up Chinese competitor, Ucommune, is aiming for its businesses.
The U.S. co-working outfit jumped right into China’s booming office-share market, forming a standalone entity WeWork China, and plotting acquisitions and expansion, supported by mega funding. Within two years, WeWork bought Chinese co-working startup nakedHub from Shanghai-based luxury resort operator Naked Group for a cool $400 million, then scooped up 25 nakedHub locations in Beijing, Shanghai, and Hong Kong, to add to its own 13 spots in China.
Then-CEO Adam Neumann took a money-making lesson from nakedHub’s operation in trendy Xintiandi: renting office space on a flexible, come-as-you-like basis, with no monthly contract. WeWork quickly launched the feature as WeWork Go. China-based customers check for open desks by mobile app, go to the location, register by QR code, and the clock starts ticking ─ 15 yuan per hour ($2.50) and double that rate for premium locations. WeWork China picked up 50,000 registered users in Shanghai after a three-month pilot of the hourly rate, which compares with a monthly rental charge of $270. WeWork is rolling out this pay-as-you-go feature to the U.S., initially Manhattan.
WeWork has rebranded nakedHubs in China, but it may be a while before the funky hip décor that’s popular with the locals is redone into WeWork’s trademark industrial black and white glass design. A NakedHub location that I checked out in central Beijing even sports a swimming pool, and its
No complaints over the spacious and upbeat spaces of WeWork and nakedHub, but some surprises. A flagship location of WeWork at Weihai Lu is a former opium factory, totally transformed into a stunning light-filled atrium surrounded by several levels of floors with meeting rooms and desks.
China’s co-working market has taken off with the entrepreneurial boom ─ part of the sharing economy fad of shared bicycles, umbrellas, basketballs, living spaces, and you name it. These state-of-the-art, co-working locations with hot desks, conference rooms, and kitchens are packed in Beijing, Shanghai, and Hong Kong. The race is on to bulk up and bring in more founders, startups, and freelancers. But the market is increasingly crowded as China’s growth slows. Price wars have erupted. As many as 40 Chinese co-working companies that over-expanded and didn’t control costs have shut down. One of the larger operators, Kr Space in Beijing, owned by China tech news site 36Kr, cut staff and scaled back ambitious expansion plans.
The battle is shaping up between WeWork China and its key challenger, Ucommune. WeWork’s China subsidiary pulled in $500 million in 2018 led by SoftBank, a huge $4.4 billion investor in the WeWork parent, on top of $500 million the year before. WeWork has canvassed China with 60 locations across a dozen megacities, adding to its global presence in 23 countries worldwide.
But keeping ahead isn’t easy. WeWork sued a Chinese competitor, Beijing-based co-working outfit URWork, for trademark infringement, in a case settled in 2018 when URWork rebranded as Ucommune. The founder of Ucommune, real estate veteran Daqing Mao, is known as the king of China co-working. Starting from 2015 and backed by $650 million in funding from majors Sequoia Capital, ZhenFund, Matrix Partners, and Sinovation Ventures, Ucommune has opened 120 locations in China and claims to be the nation’s largest office-sharing provider. It’s also tech savvy. Access to one Ucommune location I toured in Beijing is by facial recognition.
Ucommune has been powering up with a string of acquisitions, grabbing smaller Chinese co-working players Wedo, Fountown, Workingdom, New Space, and Woo Space, expanding in key Asian cities and buying Jakarta-based ReWork. It’s also moving stateside, penetrating Los Angeles, Seattle, and Wall Street, in a joint venture with Serendipity Labs in an office tower owned by China conglomerate Fosun.
Co-working is evolving as more than hot desks, free coffee, and networking events to data-driven technologies and services. The office of the future is about smart IoT technologies to connect desks, sensors for heat and light controls, computerized cameras that can track occupancy levels and usage, and online community building. China and Ucommune are at the forefront of this shift from a typical co-working space into a technology platform.
“In China, what we are doing is known as fast-response tech,” Daqing Mao, founder of Ucommune told me in an interview for my just-released book, Tech Titans of China.
Ucommune relies on its recently introduced UBazaar mobile app, which is similar to WeWork’s mobile app and Services store, where members can book desks and conference rooms, and access content, e-commerce, financial advisory, and ads plus get help with legal, human resources, and tech services. But it goes beyond that. Ucommune’s connected desks function as information portals with built-in facial recognition and cloud computing so members can sit down, exchange information, and access their work and communities. “We never treat our business as real estate. It’s not about the space or the square meter. You can move these intelligent technology tables everywhere, to office lobbies or airport lounges,” says Mao. Ucommune is working with a tech team to test a conceptual space in Beijing where these technologies will be integrated and can operate without any management present.
Like other American companies in China, WeWork may find it tough to outmaneuver a clever Chinese challenger that is smartly integrating technology tools, super-fast.
