Coworking operators in China are pushing the brakes on expansion plans as the country faces rising vacancy rates and tighter financing.
Between the end of 2017 and October of last year, coworking spaces in the top four first-tier cities rose by 60%, which helped catapult firms such as Ucommune and Kr Space.
Now, about 40% of coworking spaces were over half empty as of October of 2018, with 40 brands closing their doors in the first 10 months of 2018 according to industry association China Real Estate Chamber of Commerce.
“There’s a shake-out in the flexible office space,” said Paul Salnikow, global CEO of The Executive Centre. “Since November, we’ve seen operators in China walking away from centres, trying to give it back to the landlord. We’ve been offered furniture from some of these people, saying they’re trying to raise money.”
A possible solution for companies who are struggling to stay afloat is diversification of services that do not require more investment. For example, Ucommune’s founder Mao Daqing said that his company is focusing on partnering with enterprise clients and providing design and management services.
Rising vacancy rates will most likely affect Chinese office landlords, especially in big cities where coworking has a prominent presence.
In order to avoid possible risk of injury, landlords should be more choosey in which coworking operators they work with.
Still, not all is lost for coworking operators in China. Many large corporations have steadied office demand despite China’s economic slowdown