Co-working space operators in Asia chase alliances, funding as WeWork expands

Photo: JustCo website

The co-working industry has become the hotbed of deal activity globally, reflecting its transition from a niche market to the mainstream. Asia is following suit as rivals merge with each other and startups scout for investors in a bid to strengthen their foothold in a growing market.

Globally, there have been 44 financings in co-working space startups so far this year, raising a total of $738 million, according to CB Insights. At this rate, the industry could well outpace deal volumes and funding seen in 2016.

Of Mergers and Expansions in Asia

This year, Asia has been home to 19 equity funding deals that raised a total of $306.5 million. In comparison, there were 20 equity financings worth a total of $271.3 million in 2016.

Mergers and funding rounds have become de rigueur in the region as companies rally resources to battle the world’s largest co-working space firm, New York-based WeWork, on their home turfs.

Earlier this month, naked Hub, the co-working arm of China’s hospitality brand naked Group, and Singapore’s JustCo announced their merger that will create the largest premium co-working space operator in Asia.

naked Hub also said it is raising a $200-million Series C round at a potential valuation of $1 billion in partnership with Didi Chuxing-backer China Renaissance.

In April, China’s co-working unicorn UrWork announced its plans to merge with rival New Space. The merger, the first in the co-working space in China, will create the biggest co-working space chain in the country with a valuation of RMB 9 billion ($1.3 billion).

These developments are seen as attempts by Asian firms to ward off the threat posed by WeWork that is expanding its presence in Asia.

Bloomberg reported earlier this month that the American firm was in talks with Japanese real estate firms to open as many as 20 locations in Tokyo to make the city its largest operation in Asia. Japan’s SoftBank Group Corp, an investor in WeWork, is expected to facilitate the latter’s expansion in its home market.

WeWork, whose $20-billion valuation makes it the world’s fifth most valuable startup, already runs operations in Bangalore, Beijing, Hong Kong, Shanghai, Sydney and Seoul.

Notable deals in the co-working space industry 

Southeast Asian countries are seeing their fair share of investor interest in co-working spaces. In Singapore, Vertex Ventures participated in the seed funding round of Spacemob, while Malaysia saw Catcha Group back Common Ground and Worq raise funding from 500 Startups and Cradle Fund, among others. (Update: WeWork acquired SpaceMob in August 2017).

“Because Southeast Asia includes the world’s fastest growing economies and a much more tech savvy population than other emerging regions, there is no question about the market potential found here,” says Mario Berta, CEO of online co-working listings platform FlySpaces.

Vietnam, one of the fledgling co-working space markets in the region, is also expected to see strong growth in the next 3-5 years, according to real estate services firm CBRE.

Highlighting the opportunity for international players to expand in the country, An Nguyen, Director of Research, Consulting & Valuation at CBRE Hanoi said, “Co-working spaces are still at their early stages in Vietnam since the concept was first introduced in 2012. As of June 2017, there are a total of 17 co-working space operators in 22 venues. All but one of the operators are local.”

Recently, Vietnam-based PE firm Indochina Capital announced an investment in co-working space operator Toong. The funding was announced shortly after Toong secured a strategic partnership with Singapore-based real estate group CapitaLand in developing co-working space outlets in Ho Chi Minh City.

Property and real estate consultancy firm Cushman & Wakefield forecasts that co-working spaces will occupy 15 per cent of total office supply in Southeast Asia by 2030.

Co-working in India

Co-working is likely to see substantial growth in India in the coming years. The space is expected to receive $400 million in investments by 2018, growing between 40 to 50 per cent and reaching over 1 million sqft of leased ‘alternative’ work spaces by the end of the year.

Source: JLL

As at 2016, there are about 300 co-working operators in India operating less than 1,000 centres in urban India.

According to real estate services firm JLL, the largest business opportunity lies with large corporates (~70%) seeking alternative, activity-based workplaces to nurture their talent and further their business growth. They are followed by the emerging business sector (~20%) and professional freelancers and startup ventures accounting for the remaining 10 per cent of market demand.

The demand for co-working spaces is highest in Mumbai, New Delhi and Bangalore, while smaller cities like Pune and Hyderabad express a preference for the business centre format, as these emerged on the Indian flexible workplace scene at an earlier time.

Also Read:

naked Hub merges with Singapore’s JustCo to take on industry leader WeWork

China: UrWork, 5Lmeet get $116m from Beijing Xingpai

UrWork takes on WeWork in fight for shared spaces

Chinese unicorn UrWork merges with New Space to ward off US rival

SoftBank invests $300m in US-based WeWork, values it at $17b

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.