BENGALURU | SHANGHAI: U.S. office-sharing firm WeWork on Thursday said it will sell control of its China division to one of its investors – private equity firm Trustbridge Partners – as it steps back from a competitive market where it has suffered low-occupancy rates.
The deal effectively offloads the China unit away from the parent, which has faced fundraising issues since a failed attempt to go public in 2019.
WeWork said it will maintain a minority stake and “participating interest.” Concurrent with the deal, the division has received $200 million in funding from existing investors.
Michael Jiang of Trustbridge Partners will serve as WeWork China‘s acting chief executive officer.
Trustbridge and Singapore state investor Temasek Holdings (Private) Ltd held talks with WeWork’s Chinese unit over increasing their stakes and taking majority ownership, Reuters reported in January.
WeWork shelved its initial public offering in 2019 after investors grew wary of its losses, business model and corporate governance, leading to the resignation of co-founder and former chief executive officer Adam Neumann.
It has since undergone significant management change yet remains enmeshed in lawsuits over a $3 billion tender offer to existing shareholders.
Last month, the New York-based startup said it had almost halved its cash-burn rate from the end of last year and obtained a $1.1 billion commitment in new financing from Japan’s SoftBank Group Corp.
SoftBank, meanwhile, has been steadily offloading assets to raise money after a spending spree late last decade. This month, it said it would sell chip designer Arm Ltd, purchased in 2016, to semiconductor giant Nvidia Corp for $40 billion.
KOLKATA: Small- to medium-sized warehouses and co-working spaces are suddenly the rage in the Sector V IT hub of Salt Lake owing to the pandemic, which has made WFH the new normal and forced IT firms and private companies to do away with expensive — and expansive — office spaces.
While smaller startups have been among the first to let go of large office spaces, several bigger companies with multiple commercial spaces are also recalibrating their options.
“Global economic challenges and an increase in WFH culture is leading to a muted demand for office spaces in the city,” said Kalyan Kar, the secretary of Sector V stakeholders’ association and the MD of Inthink Knowledge Ventures. “Sector V is one of the most heavily affected places because of this trend and a large number of companies — mostly startups and even some companies with multiple office spaces in the township — are revising their options. While some are letting go of the spaces completely, others are going for a space-sharing model,” he added.
Arindam Ray, director of AQB Solutions in Sector V, who had shifted to an 8,000sq ft office at the start of the year, is also planning to shift to a smaller space. “As of now, we don’t need such a large space. We had set up this place at a huge cost but, only 2-3 of the 80-odd employees are coming to office. We have reached an agreement with the owner to pay a much reduced rent, but we are also thinking of shifting to a smaller space in a month or two,” Ray said.
The AQB Solutions director said he was in talks with the landlord to share the current space with some other company, which would halve their cost.
While city-based officials in major corporates and IT firms told TOI they were in no hurry to return to pre-Covid office norms, and many even planned to let go of large spaces, emailed queries to spokespersons of major players like Cognizant, TCS and PWC did not generate in any replies.
Ravindra Chamaria, the chairman-cum-managing director of Infinity Group, which owns major Sector V commercial spaces like Infinity Thinktank, Infinity Benchmark and Godrej Waterside, confirmed the trend, saying companies were trying their best to reduce cost. “It is true that people are trying to cut down costs. But there are also some companies who are coming over to Sector V, shifting their offices from the city’s central business district, in a bid to cut down on expenses. At offices where most employees are working from home, they cannot afford to shut down the office completely, as there is always the need for servers and tech support. Overall I believe this is a temporary phase; but, in the long run, people will need more office space in the new normal future,” said Chamaria.
The current situation has also boosted a demand for co-working spaces. Neetish Sarda, the founder of Smart Works, a leading co-working centre in the country, said there had been a sudden spike in the number of queries and finalisation of deals in their co-working spaces in Kolkata over the last few months. “Although we have a big set-up in Kolkata, business was a bit slow. But since the pandemic, there has been a steady spike in the number of queries and closure of deals. We are also in the final stages of deal completion with some big multinationals, who are willing to let go of their large office spaces and shift to our co-working spaces spread across the city,” Sarda told TOI.
Industry experts said even though corporates may think it’s more viable for employees to WFH during the pandemic and using smaller office spaces, it is not a permanent solution. “A large chunk of work needs constant monitoring, which is only possible in an office environment. When people start coming back to office, they would need even larger spaces to suit the new normal norms. We believe this is a passing phase,” said Chamaria.
BENGALURU: The flexible office space is expected to undergo a major consolidation phase with uncertainty looming large on the segment due to the Covid-19 pandemic and a resultant demand slump.
While a large operator like RMZ is exiting the business, global major WeWork plans to expand as per client specifications only for some time. Awfis and Smartworks have also slowed down the pace of expansion as they continue to study the evolving market dynamics.
“We will grow as per our client requirement and focus on opportunistic expansion rather than speculative,” said Karan Virwani, CEO at WeWork.
Though consolidation within co-working space started in 2018 with major acquisitions like One Co.Work acquiring IShareSpace and AltF CoWorking acquiring Noida-based Daftar India, Covid-19 will accelerate the process as weak players will be weeded out, say experts.
The period of low occupancy with increased operational costs is making multiple small players unviable. “There will be huge consolidation in the co-working space as managing cash flows will become difficult. We are onboarding clients and offering rental waiver till they occupy the facility,” said Neetish Sarda, cofounder of Smartworks.
The pandemic has hurt small co-working space operators with around 3.2 million sq ft of flexible office space expected to be vacated this year, according to a study by Knight Frank India. “We expect larger players with a greater weightage of enterprise tenants to endure, while those with tenant profiles predominated by MSMEs and startups are expected to shut businesses,” said Shishir Baijal, chairman, Knight Frank India.
NEW DELHI: Co-working and managed workspace operators have started witnessing fresh demand after a five month disruption due to Covid-19 pandemic as leading co-working players have reported reaching 50 per cent fresh leasing levels in July compared to the monthly average during the pre-Covid times.
Covid induced lockdown had impacted the co-working operators the most as a Knight Frank study says that around 3.2 million square feet (MSF) of flexible space is expected to be vacated by these operators in 2020.
“We used to transact 1500 seats every month on an average but business was impacted severely due to Covid-19 pandemic. Now we are back to doing 1000-1200 seats in a month,” said Amit Ramani, Founder and CEO, Awfis.
There are over 250 co-working players operational in India but the segment is dominated by top 10 players which have cornered around 75 – 80 per cent of the market share in the top eight cities.
The Indian Workspace Association (IWA) has said that its members have reported reaching 50 per cent occupancy levels.
“We continue to see contractual occupancy of the industry in between 40-50 per cent of what we were witnessing in pre-COVID times. Various players are also offering innovative solutions to suit the evolving needs of occupiers amidst the pandemic,” said a IWA spokesperson.
IWA represents leading companies like Vorqspace, WeWork India, 91 Springboard, BHIVE Workpsace and Awfis, among others.
WeWork did not respond to a separate email query.
Paras Arora, Founder and CEO of co-working operator Qdesq said that they transacted 1100 seats in July.
“We were transacting 1800 seats in March, and we believe we will get back to the same number by October. There was an impact on revenue due to lockdown. April to June fell by 50 per cent. In July, we saw a 10 per cent month on month pick up,” said Arora.
Managed office space provider Skootr said that there has been a dip of close to 10-15 per cent in the leased area, but leads have started coming in again.
“For us, the impact has been limited being a purely managed office player. Our clients are primarily MNCs and large corporates which have been able to sail through these turbulent times slightly better than few other companies,” said Puneet Chandra, Co-founder and Director, Skootr.
However, some of the co-working operators are witnessing slow recovery and expect demand to improve with the opening of public transport.
“The recovery is quite slow , but I won’t say that the market is not picking up . We are confident that once public transport, especially the metro starts functioning again, the numbers will get much better.
Earlier, we used to be at 90 per cent occupancy but post-covid it has come down to 10 per cent to 15 per cent,” said Akshita Gupta, Co-Founder and CMO of ABL workspaces.