China’s co-working operators squeezed by a lack of funding are shutting down
- Kr Space, one of China’s largest co-working space operators, is cutting staff and scaling back ambitious expansion plans
- With co-working operators engaging in a bloody price war, profitability remains a distant possibility
A drought in financing from venture capitalists has affected co-working space operators who have been heavily reliant on funding to fuel their rapid expansion and valuation. And amid the funding crunch, even major operators such as Kr Space have found the going tough.
Forty companies in the shared-office sector have vanished in the 10 months from January to October 2018, while about 40 per cent of co-working projects are more than half empty, according to a report by the China Real Estate Chamber of Commerce (CRECC), an information exchange platform for the mainland’s property sector.
Lack of fresh financing is a matter of life and death for these start-ups, which occupy 3.94 million square metres or 520,000 desks in China’s first-tier cities alone. Besides, no company has ever reported a net profit.
Analysts say that without new funding, co-working start-ups cannot afford to indulge in a price war initiated by deep-pocketed giants such as New York-based WeWork, which commenced operations last year in cities including Beijing, Shanghai, Shenzhen, Guangzhou and Hangzhou.
They added that smaller start-ups will end up either shutting down or being acquired.
