Asia’s co-working players JustCo and naked Hub merge to fend off WeWork
By Lin Zhiqin
/ EdgeProp |
Many co-working operators do not really understand co-working, according to Kong Wan Sing, founder and CEO of JustCo, a home-grown serviced office and co-working operator. Co-working is not just providing a space with desks for people to do their work, he explains.
Last November, when Kong was in Shanghai, he was introduced to Grant Horsfield, founder and chairman of China- based co-working operator naked Hub. “We chatted over drinks. Then, I went to visit naked Hub’s co-working space and he came to see JustCo’s,” Kong recounts. “And I thought, ‘This guy knows what he’s doing. Maybe we can do something together.’”
At the time, Kong reckoned that demand for co-working space would continue to grow and there would be consolidation in the market. He was open to a merger. On July 18, JustCo and naked Hub announced plans to merge. The merger will lead to the formation of the largest premium co-working operator in Asia, according to the two companies.
JustCo takes up 35,000 sq ft across five floors at its co-working space at 120 Robinson Road
JustCo currently has 180,000 sq ft of space in Singapore: 35,000 sq ft across five floors at 120 Robinson Road, 15,000 sq ft at 6 Raffles Quay, 50,000 sq ft across two floors at UIC Building and 80,000 sq ft across two floors at Marina One that will open in August. The JustCo co-working spaces at UIC Building and Marina One have unobstructed sea views, according to Eileen Wee, JustCo’s marketing communications manager.
JustCo’s members include bike sharing app company Mobike; Line, a messenger, chat and video call app; and US unicorn company Cloudflare, a content delivery network and security services provider. By end-2017, JustCo will have 400,000 sq ft of space in Singapore, says Kong. There are plans to open JustCo co-working spaces in Bangkok, Kuala Lumpur and Jakarta, and “expand all the way to Australia”, he adds.
naked Hub was started in November 2015 and within the first 10 months of operations, eight naked Hub co-working spaces were opened, according to its CEO Jonathan Seliger. There are currently 11 naked Hub co-working spaces — in Beijing, Shanghai and Hong Kong. naked Hub has also branched out into Vietnam, where it is set to open a co-working space in Ho Chi Minh City and another in Hanoi. The company expects to have 21 co-working spaces across Asia by end-2017.
Horsfield (left) and Kong at naked Hub@Bonham Strand, the first naked Hub co-working space in Hong Kong
(image source: naked Hub)
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The combined portfolio of the merged company will have a gross floor area of 140,000 sq m (1.51 million sq ft) in 41 locations across six countries that can serve more than 8,000 companies and 32,000 members, according to JustCo and naked Hub.
‘Coworking market untapped’
The co-working market grew 71% annually from 2007 to 2015 and is projected to grow 68% annually from 2016 to 2018 globally, according to Statista, an online statistics portal. “The co-working market is very big and still untapped,” says Kong.
According to him, many small and medium-sized enterprises that used to rent their own office space have decided to move into co-working spaces, which have a pleasant environment and offer access to the community of people working there. Large corporations that used to lease space from commercial landlords are also becoming interested in engaging co-working operators to manage their office space, or moving into a co-working space.
Last September, HSBC took out more than 300 memberships at WeWork’s Tower 535, a Grade-A office building in Hong Kong’s Causeway Bay. Last November, Microsoft bought WeWork memberships for 300 of its employees, allowing them to have access to WeWork offices in New York. In April, IBM inked a deal with WeWork for 600 employees to move to WeWork’s 88 University Place office in New York. Lendlease has moved its regional headquarters in Singapore, which has 150 workers, to The Work Project, a co-working space that opened at OUE’s Downtown Gallery in June.
Artist’s impression of JustCo’s co-working space at UIC Building, where it occupies 50,000 sq ft across two floors
(image source: JustCo)
The business model for co-working operators has also evolved. Previously, they had to lease the space, but there has been a shift to the management contract model where the operator is paid a fee. According to Kong, JustCo has been in discussions with a US-headquartered Fortune 500 company to revamp the latter’s Singapore office and operate it as a co-working office, complete with a community of members who are not the US company’s own employees.
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JustCo is also looking to take up close to 100,000 sq ft of space in a shopping mall that will house at least 2,000 members, says Kong. He reckons it will inject life into the shopping mall because of the additional footfall and spending from the community.
“Three years ago, I was very sceptical about co-working. I used to wonder how people can work in an open area and how they collaborate,” says Kong. “But it’s good. Collaboration is the new way of working. Now, our office is open.”
Defending territory
JustCo and naked Hub are working with China Renaissance to finalise a US$200 million ($272.7 million) Series C funding round by end-August. The Beijing-based investment bank has advised on deals for ride-hailing app company Didi Chuxing as well as Mobike and the listing of e-commerce company JD.com. “It will value us at US$1 billion and is a very important part of our conditional merger,” says Kong.
naked Hub closed a $33 million funding round led by Gaw Capital, a Hong Kong-based private-equity real-estate firm, in November 2016. JustCo is backed by European private- equity firm Tikehau Capital Partners and Singapore’s Pinetree Capital Partners. According to Kong, Tikehau and Pinetree are also looking to participate in the Series C funding round.
According to research firm CB Insights, New York-based co-working company WeWork is the fifth-most-valuable privately held start-up. Earlier this month, WeWork raised US$760 million in a funding round that valued it at about US$20 billion. WeWork is the largest co-working operator in the US. It has operations in close to 50 cities. In Asia, WeWork operates in China, Hong Kong and India and is set to begin operations in Tokyo soon. Singapore is said to be We- Work’s next stop, based on job vacancies it is trying to fill.
“I want to be No 1 in Southeast Asia in two years,” says Kong. With WeWork muscling into Asia to grab market share, there is a need to grow fast and that will require funding, he adds. “We have to defend our territory.”
This article appeared in The Edge Property Pullout, Issue 790 (July 31, 2017) of The Edge Singapore.
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