Mar 19, 2019 (China Knowledge) - Co-working spaces in China are now scaling back on their expansion plans to focus on more value-added services for the clients such as office customization and management as they have to contend with rising vacancy rates and tighter financing.
The current situation marks a shift in the Chinese co-working industry which has been growing exponentially for the last two years with operators such as Ucommume and MyDreamPlus raising hundreds of millions of dollars.
The combined area of co-working spaces in China’s first-tier cities surged by 60% in the first 10 months of last year however, 40% of these spaces had a less than 50% occupancy as of October last year.
The Chinese co-working space market is currently in a transition phase and many operators are now looking to make their exits as growth in the market slows down. Many firms are also looking to diversify into less cost-intensive businesses such as office design and management services to supplement their revenue stream.
Ucommune, one of the largest co-working space operators in China has now shifted its focus towards management and is looking to open another 30 co-working spaces this year in partnership with enterprise clients to also provide design and management services.
Similarly, US-based WeWork has also started offering such services since last year.
The slowdown in the co-working space market will also affect landlords which have been depending on such operators for rental income. Co-working space operators are now less willingly to pay high rents to secure space but instead enter agreements with landlords for subsidies of profit-sharing models to reduce their risk exposure.
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