WeWork, Sun Hung Kai sign lease deal as struggling US start-up prepares to open co-working space in Nanjing

By Pearl Liu pearl.liu@scmp.com / https://www.scmp.com/business/companies/article/3033609/wework-sun-hung-kai-sign-lease-deal-struggling-us-start-prepares?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | October 21, 2019 9:32 AM SGT
Struggling co-working firm WeWork has opted for a traditional long-term lease agreement with Sun Hung Kai Properties to open its first hub in Nanjing.
The world's largest flexible office space provider said on Friday that it has leased four floors in SHKP's Nanjing International Finance Center Tower One. Although it did not say when it plans to open the space, WeWork said it aims to have three hubs in the capital of China's southern Jiangsu province up and running by the end of the year.
Under the traditional tenancy lease agreement, a company usually pays a large upfront deposit for a lease that could be for as long as 10 years. In Hong Kong, WeWork has signed a few long-term leases with Hysan Development. Co-working operators usually opt for an asset-light model where they share revenues with the landlords.
Although the US firm did not say how much it had paid to secure space in SHKP's newly completed complex, comprising two office towers, retail space and hotel in Nanjing's central business district, the average daily rent in the area was 4.7 yuan per square metre, according to Savills.
The interiors of WeWork's co-working office space in Nanjing IFC. Photo: Handout alt=The interiors of WeWork's co-working office space in Nanjing IFC. Photo: Handout
Each floor of Nanjing IFC is roughly around 1,400 square metres, which means that WeWork could pay around 820,000 yuan (US$116,000) a month in rent, excluding management fees.
However, the continuing expansion frenzy is likely to add to WeWork's high debt load. As of June, the company's minimum lease obligations stood at US$47.2 billion, according to its filing with the Securities and Exchange Commission in August.
In January, WeWork was valued at US$47 billion. Estimates of WeWork's value fell to as low as US$10 billion to US$12 billion around the time that it...