Will WeWork’s woes affect Hong Kong’s overbuilt co-working sector?

WeWork’s rapid expansion in Hong Kong does not mask the fact that the company, which received a US$9.5 billion lifeline from SoftBank, is yet to post a profit

Market observers believe the current business model is not sustainable and the industry will see consolidation in the next 12 to 24 months

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Will WeWork’s woes affect Hong Kong’s overbuilt co-working sector?

Published: 12:15pm, 26 Oct 2019Updated: 12:50pm, 26 Oct 2019

A quick glance at WeWork’s Hong Kong website gives a glimpse into the co-working company’s operations in the city. The start-up operates eight hubs in key business districts, plans to open four more by the year-end and has recently signed leases for another three.

WeWork’s runaway expansion in Hong Kong seems a world apart from the troubles that have gripped its US parent. Until Wednesday there was every chance that one of the world’s most valuable unicorns would have spectacularly unravelled had Japanese conglomerate and major investor SoftBank not stepped in with a US$9.5 billion rescue package. The deal also sees co-founder Adam Neumann leave the company, although he walks away with stock valued at US$1.2 billion.

WeWork’s rapid expansion in Hong Kong has seen it acquire about 1 million square feet. Although it is nearly a third less than the 3.7 million sq ft it operates in London, it still translates into about 1 per cent of Hong Kong’s leasing market, while the industry as a whole in the city accounts for 3 per cent.

WeWork’s rapid expansion masks the harsh realities about the sector. Most of the players in the co-working space are not profitable.