HK co-working space brand set to enter mainland market

November 23, 2018 15:31
Co-working space operators see enormous opportunities in the mainland market despite concerns over the Sino-US trade war. Photo: theDesk

Riding the wave of the startup boom, operators of co-working spaces are aggressively expanding in mainland China and Hong Kong. Last week, Chinese unicorn UCommune announced it has raised US$200 million in its biggest capital-raising round as it pursues its overseas push, highlighting the intense battle for dominance in the co-working space arena.

The Hong Kong Economic Journal recently sat down with Thomas Hui, co-founder of theDesk, a shared-office provider in Hong Kong, to discuss the latest trends in the sector, and how homegrown brands can tap the opportunities in the mainland China market.

HKEJ: We have seen co-working space businesses aggressively expanding in recent months. What are your thoughts on this trend?

Hui: As we can see from the current economic cycle and the escalating trade tensions between China and the US, the economy, in general, seems to be slowing down in growth. Despite that, in the long run, we believe that the “new economy” sector will continue to expand, offering opportunities to grow for the co-working space industry.

Co-working space enhances the flexibility of businesses in allocating the resources. When the economy is in good shape, companies using co-working space can grow their businesses without enlarging the office space. Also, when the economy turns bad, companies can make use of co-working space to adjust their resource allocation, adapting to the market atmosphere.

As I understand, the total area of commercial offices in Hong Kong has now reached 270 million square feet. In contrast, the combined area of co-working spaces has reached less than 2 million square feet, accounting for less than 1 percent of total office area in the city. We expect the business scale of co-working spaces in the city will become larger in the next 10 to 20 years.

Q: Do you think the pricing for co-working spaces would remain stagnant even if the economy begins to enter a down cycle? And why?

A: Take my friend's case as an example. His office is located in Hung Hom, Kowloon, with a lower rent compared with offices on Hong Kong Island, but the traffic there in Hung Hom is not so convenient. Taking all the company's operating expenses into account, such as office rent, renovation expense, property management fees, employee salaries, and others, he found that it is costing him HK$10,000 to keep that office in Hung Hom.

In contrast, by joining a co-working space, the monthly charge is generally about HK$6,000 only, which offers an advantage of higher flexibility for the business, not to mention the cost savings. That explains why joining co-working spaces has become a popular option for businesses.

Q: The market believes the Chinese economy is being affected by the escalating Sino-US trade war. Why do you still plan to expand your co-working space business into the mainland market?

A: Every entrepreneur needs to be bold enough to make decisions when running a startup; also they have to be optimistic enough about their business outlook. As the old saying goes, crises always present great opportunities. I believe that even if the Sino-US trade war continues, it won't have a major impact on China’s economy, nor is it a fatal threat. The Chinese government is likely to boost the domestic consumption market, while pushing further the domestic economy’s transformation toward high value-added and new economy industries.

Based on this outlook, we will expand the co-working business to Shanghai and Shenzhen next year.

On the other hand, concerning Hong Kong's future economic role in the Greater Bay Area, the city will benefit from partnering with Shenzhen, China’s innovation and technology hub, while Shanghai will boost its importance in the nation’s domestic market. We look forward to bringing strategic value to our business members and the community, helping them to get a foothold in the mainland China market.

Q: There have been Chinese co-working space operators entering the Hong Kong market in recent years. How do you evaluate the competitive relationship between co-working space brands in Hong Kong and mainland China?

A: I believe there is healthy competition in the market. In co-working spaces there should not be a single winner, as every player has a different market positioning and serving a different group of businesses. TheDesk has been connecting with other operators to communicate and collaborate with each other.

This article appeared in the Hong Kong Economic Journal on Nov 23

Translation by Ben Ng with additional reporting

[Chinese version 中文版]

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