WeWork has indefinitely delayed the opening of at least three co-working spaces in Hong Kong that were planned for late last year. Now, market observers believe the coronavirus pandemic could force the company to retreat from the city as it takes a toll on an economy already in recession.
The cash-strapped company had planned to open stations in Hysan Place in Causeway Bay and Sun Life Tower in Tsim Sha Tsui at the end of 2019, while its operations in Octa Tower in Kowloon Bay have already been delayed by more than six months.
"At the moment, we are focusing on our top priority of ensuring members across the world to have a safe workplace environment," the company said in an email, referring to the Covid-19 pandemic. It, however, did not provide any update on the opening of the three centres. WeWork's operations have been hit in the city for over a month as people avoid crowds and work from home in a bid to prevent the disease from spreading.
"The cost of surrendering the space may be just too high," said Vincent Cheung, managing director of Vincorn Consulting and Appraisal. "We see a lot of co-working spaces are at least half empty while some are even worse."
He added that keeping the leased space idle and not making further investments, such as hiring staff and saving on facilities maintenance fees, is the best way to stop the bleeding.
WeWork's rapid expansion in Hong Kong has seen it acquire about 1 million sq ft of office space, translating into about 1 per cent of Hong Kong's leasing market, while the co-working industry as a whole in the city accounts for 3 per cent.
In a press release sent out in October, the start-up said "in the fourth quarter, WeWork will add four new locations in Hong Kong, namely WeWork The Quayside in Kwun Tong, WeWork Sun Life Tower in Tsim Sha Tsui, WeWork Hysan Place in Causeway Bay and WeWork H Code in Central." Back then on its website, WeWork had Octa Tower as "opening soon". Since then only HCode and The Quayside have been launched.
WeWork is not the only flexible office-sharing company that has suffered from the market downturn.
Hong Kong-based Campfire, which launched in 2016, has surrendered some spaces at the end of last year. It currently operates only three sites, down from six. Beijing-based Kr Space, meanwhile, shut down its last co-working facility in Hong Kong in November.
"The impact on co-working sector is worse than that caused by the social unrest as now people are trying to stay away from crowds and avoiding contact with strangers, which is basically the contrast of the idea of sharing or flexible work space," said Peter Yuen, managing director and head of investment and sales at Savills.
But there are some in the industry willing to take a gamble even in such uncertain economic climate. The owner of V-Point in Causeway Bay said that it plans to run nine floors of co-working space surrendered by Campfire on its own.
"The flexibility of co-working space is quite important for companies when economy is looking gloomy as some may downsize in the short-term," said Tim Li, the general manager of V-Point, which has renamed the shared-office space as V-Co.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.