Deal focus: Naked Hub scales up for WeWork challenge

When Grant Horsfield, founder of Shanghai-headquartered co-working space operator Naked Hub, met Wang Sing Kong of Singapore-based JustCo at an industry event last July they soon realized they shared a common vision – to become the number one player in Asia. At that time, US-based WeWork had started to expand in the region on the back of a $430 million round led by China’s Legend Holdings and Hony Capital.

“Co-working is about collaboration and connection, which we see as a new way of working. As a co-working spaces operator, either you build the business organically or you work with other people,” says Kong. “Over the last nine months, we [Naked Hub and JustCo] talked about a marriage. Finally, today we are announcing our marriage. We believe that we are now the only competitor to WeWork in Asia.”

Launched in 2015 with an initial investment of RMB100 million ($15 million), Naked Hub has a network of 21 centers across mainland China, Hong Kong and Vietnam. Following the merger with JustCo – the largest player in Singapore with a growing footprint in Southeast Asia – the combined entity will have 1.5 million square feet across 41 locations in nine cities. WeWork has 13 centers in Asia, with three more expected to open shortly, although these facilities tend to be larger than those of its competitors.

Naked Hub raised a $33 million Series B round led by Hong Kong’s Gaw Capital last year, while JustCo previously received funding from Pinetree Capital and Tikehau Capital. Together they are now raising about $200 million – the round is expected to close next month – at a valuation of $1 billion to support Asian expansion. JustCo will target Southeast Asia under its own brand while Naked Hub focuses on North Asia, but they will do this with integrated resources.

“Beijing, Shanghai, Hong Kong and Singapore will drive growth in our locations. In Hong Kong, we genuinely believe we will have 20 locations by the end of next year,” notes Horsfield.

The number of co-working spaces across Asia Pacific reached 1,700 at the end of last year, with floor space of 4.8 million sq ft, according to Colliers International. The build-out has been particularly visible in China, with Beijing and Shanghai hosting more than 1,000 spaces. Hong Kong represents the top end of the market: 41 centers and a monthly cost per desk of $1,100. This compares to 127 centers and $450 per desk in Singapore.

Naked Hub, which has eight locations in China, is competing with local player UrWork, but Horsfield says the companies have different market propositions. While UrWork emphasizes low cost – charging RMB1,000 ($150) or less per desk – Naked Hub focuses on serving diversified industries and its rates are three times higher.

“The only way we can succeed is by converting traditional office tenants into co-working space tenants,” he says. “Start-ups are an added benefit.”

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• Topics
• Greater China
• Southeast Asia
• Real estate
• Expansion
• Hong Kong (China)
• China
• Singapore
• Gaw Capital Partners