To beat property glut, shared offices target new startups

Pan Shiyi, chairman of Soho China Ltd, poses for a photo with startup tenants at one of his office buildings in Beijing. The real estate tycoon plans to expand the number of desks in Soho's shared offices almost 10-fold in the next three years.[Photo/Provided To China Daily]

China's real estate developers, struggling with a widespread glut of office space, are pursuing a new type of tenant: startups seeking shared work facilities.

Soho China Ltd plans to expand the number of desks in its shared offices almost 10-fold in the next three years, hosting companies such as Uber Technologies Inc. Last week, it signed a deal with Greenland Holdings Corp to help convert the latter's properties into co-working spaces.

Sino-Ocean Land Holdings Ltd in September unveiled a similar plan as part of a new complex in Hangzhou, capital city of Zhejiang province, while China Vanke Co Ltd is wooing e-commerce startups to its projects in Guangzhou, capital city of Guangdong province.

At Soho 3Q's project on The Bund in Shanghai, single-person desks are available for 700 yuan (about $109) a week, with free Internet connection, Wi-Fi, some storage and coffee services, while separate six-people offices are offered for 5,460 yuan a week, according to the company's website.

With CBRE Group Inc predicting 1 million square meters of new office supply to hit the market in Shanghai alone next year, catering to cost-conscious startups offers developers a way to stave off a potential glut.

"Emergence of shared offices is in response to the recent rapid development of new startup companies and the government's policy to encourage more entrepreneurial companies," said Frank Chen, Shenzhen-based head of China research at CBRE, adding that such tenants over time may fuel demand in traditional prime locations.

Premier Li Keqiang, seeking to rejuvenate flagging growth, has pledged to create more startups with his new-economy push called "Internet+". That promises to boost the share of the nation's high-tech workforce that prefers to work in shared spaces provided by the likes of WeWork Cos, the New York-based office-sharing company partly owned by JPMorgan Chase & Co and Harvard Management Co.

"What is really changing in China at present, under the growing impact of the Internet+ technologies, is the basic structure of employment," said Andrew Ness, Cushman & Wakefield Inc's head of research for China. Builders like Soho China "will be able to leverage on the full force of the emergence of what is effectively a new stream of office demand."

Some 14 million startups will be created in China next year, generating demand for more than 420 million sq m of shared work space, assuming an average of five employees per company, according to Wang Chen, a Beijing-based analyst at Essence Securities Co.