WeWork Cos., the co-working space company that’s among the world’s most valuable startups, is in advanced talks to rent a building in Hong Kong’s popular nightlife district near the city’s business center, according to people familiar with the matter.
The New York-based firm is seeking to rent Hotel LKF by Rhombus on Wyndham Street, said the people, who asked not to be identified because the information hasn’t been publicly disclosed. The boutique hotel, located in the Lan Kwai Fong district that’s known for its bars and nightclubs, closed down on July 1 and be converted into an office building by the middle of next year, the owner Peterson Group said in June.
WeWork’s expansion in the world’s priciest property market comes as soaring office rents have pushed some financial firms and hedge funds out of the financial district. Demand for flexible and shared offices is surging in Asia, with the area taken up by such work spaces in Hong Kong’s central business district expected to double this year to 250,000 square feet, according to property broker Colliers International. Flexible work spaces accounted for about 9 percent of the office space in the city’s financial district as of 2016, Colliers said.
Spokeswomen at Peterson Group and WeWork declined to comment. The agreement isn’t final and negotiations may still fall through, one of the people said.
WeWork rents out flexible office spaces to startups, freelancers and businesses and runs more than 20 office projects across Asia. As part of its expansion across Asia, WeWork announced a joint venture with SoftBank Group last week in Japan and plans to open its first office in Tokyo in 2018.
The company last year rented more than 100,000 square feet in Hong Kong’s Wan Chai and Causeway Bay areas, according to data from Jones Lang LaSalle Limited. Hotel LKF, which includes 14 floors of rooms and nine floors of retail space, is housed above Gordon Ramsay’s Bread Street Kitchen & Bar restaurant, which is expected to stay.
The average annual prime office rent in Hong Kong is $112 per square foot, higher than the $86 per square foot in London’s city center and $82 per square foot in midtown New York, according to data from Colliers.
Co-working spaces let people stay in traditional office areas while reducing rental costs, Denis Ma, Hong Kong research head at Jones Lang Lasalle, said in an phone interview.
“Twelve months ago, when we talked to developers and asked them what kind of tenants they were targeting to fill up their new buildings, most would’ve mentioned large international banks. Fast forward to today, most will say they’re talking with co-working operators,” said Ma.