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2019年4月29日 (月)

The goal is to reduce rents by sharing them

  A revenue-sharing agreement would see landlords inject cash or reduce their tenant’s upfront payment and in return have a share with the workspace provider’s money

  Inside of WeWork, a shared business room, in Causeway Bay. Image: Jonathan Wong

  How would you hold prices down if you want to aggressively expand your company from the world’s most expensive office area?

  US co-working house supplier WeWork thinks it's the solution. It'll try and persuade Hong Kong’s commercial landlords to enter into revenue-sharing preparations as it normally takes up new places.

  Whether it is equipped to influence landlords to shift away from the traditional fixed-rent product, absolutely everyone stands to gain, in keeping with Christian Lee, vice-chairman of WeWork Asia.

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  “We’ve adopted this plan in other elements of the area,” said Lee. “Landlords sustain their manage above the belongings but provide in WeWork to run the building with them. Whenever we talk to the landlords, we allow them understand that by way of [this variety of] lease, we make much more and they make extra.”

  The big apple business office rents capture approximately Hong Kong - but Asian town continues to be world’s most expensive location to established up store

  A revenue-sharing settlement - or “participating lease”, as WeWork has decided on to call it - would see landlords associate with WeWork either by injecting capital or lowering their tenant’s upfront payment as well as in return, have a share in the workspace provider’s cash flow. WeWork would also assist to control the constructing, if that formed part of a certain agreement.

  But some analysts think persuading Hong Kong’s landlords to abandon their favoured fastened regular rental profits in favour in the new business model are going to be less difficult said than done.

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  “Landlords in Hong Kong are quite traditional so why would they put themselves in such a difficult position and share the risks with co-working operators?” stated David Ji, head of research and consultancy at Knight Frank.

  Business office rents in Hong Kong’s prestigious Central district have soared 7.5 per cent in 2018, forcing a number of law firms, finance companies and even investment banks to relocate to cheaper areas such as Wong Chuk Hang and Kowloon East. Business rents there are generally between a third and a half what they are in Central.

  WeWork has already inked a revenue-sharing settlement with Daman Land in Malaysia, and with global supply chain manager Fung Group, which owns the LiFung plaza in Shanghai.

  The arrangement allowed Fung Group to “maximise the use of our buildings that cater towards the changing needs of tenants and utilise the room a lot more effectively,” explained Belinda Fung, chairman of Fung properties China, the real estate arm of Hong Kong-listed Fung Group.

  “The strategic partnership allows us to generate greater returns than a traditional leasing model.”

  WeWork on Tuesday launched its eighth location in Hong Kong, with a lot more than 1,000 desks spread around 17 floors of LKF Tower in Central.

  Next year, it plans to open four a lot more, one from the International Commerce Centre, one within the Quayside in Kowloon, one at Hysan Spot and another at Lee Garden One.

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  WeWork opens third Hong Kong location in Taikoo Shing

  Market observers believe a revenue-sharing scheme could provide a buffer zone for co-working operators in Hong Kong if the market turns sour.

  “We’ve seen some operators paying a rather aggressively high rent during the past two years in order to gain market share. Now, amid the rising uncertainties, they is going to be under pressure as rents aren’t expect to increase much because of softening demand,” explained Denis Ma, head of research at JLL Hong Kong. “Such a company model could minimise risk through a lower upfront payment and a shared partnership with landlords’ injection of capital investment.”

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