Hong Kong's booming shared office market has attracted another new participant, with Beijing-based Kr Space taking up seven floors in a brand new grade A office building in the city's Wan Chai district.
Co-working space operator Kr Space is a spinoff of Alibaba Group Holding Ltd.-backed Chinese tech news site 36kr.com. The startup currently runs 200,000 square meters of office space in nine major Chinese cities, including Beijing and Shanghai, and the latest leasing in Hong Kong marks the company's first location outside of China.
Kr Space has rented 83,000 square feet of space at the 21-story One Hennessy office building in Wan Chai, which is located next to the city's central business district on Hong Kong Island. The building, owned by Chinachem Group Co. Ltd., is scheduled to be completed in the second quarter of 2019.
"We are very positive about the Hong Kong market; there is heavy demand for co-working spaces," Sean Qian, vice-president of Kr Space told S&P Global Market Intelligence.
"The office vacancy rate in Hong Kong is relatively low, which offers great room for rental growth, and we expect our business will be profitable here," Qian added.
The monthly rental rate for the Wan Chai space will be over HK$80 per square foot, according to the company, which means its total monthly rental cost will be over HK$6.6 million for the seven floors. Kr Space has signed a 10-year lease agreement with Chinachem, in a deal the former described as "the biggest leasing agreement [in Hong Kong] so far in 2018."
As one of China's biggest co-working brands, Kr Space said Hong Kong represents a cornerstone of the company's target to become an international co-working operator, as well as to catch up with co-working giant WeWork.
Qian said the company is hoping to attract leading companies in finance, technology and other sectors to become their tenants at One Hennessy. At the same time, the startup is also actively looking for other potential spaces to lease in Hong Kong.
The flexible working space sector has seen significant growth in the Asian financial hub. JLL data shows co-working and serviced office space offerings have increased by 50% in the past three years.
Currently, there are more than 50 co-working space operators with over 80 locations in the city, spanning more than 1 million square feet of space, according to the May 16 JLL report.
Frank Ma, director of PRC office services at Colliers International, who participated in Kr Space's One Hennessy leasing, said many co-working spaces on Hong Kong Island are near full occupancy, and, coupled with tight office supply in the area, provide huge opportunities for flexible working space providers.
For Kr Space, their latest venture in Hong Kong will help the company better serve the needs of its domestic tenants for overseas expansion and offshore financing, also providing the venue for it to organize its own tech events in Hong Kong. "There will be a lot of synergies," Ma said.
Mainland Chinese shared space providers have emerged as a major force in Hong Kong's highly competitive co-working market. Ahead of Kr Space, mainland operators such as Naked Hub and Ucommune (Beijing) Venture Investment Co. Ltd. have already expanded into Hong Kong.
"We still see plenty of room for the growth [of co-working spaces] with many operators, especially those from mainland China who are still eager to establish a foothold in the city," said Denis Ma, head of research at JLL Hong Kong.
From the perspective of property owners, Collier's Ma pointed out that local Hong Kong landlords are also quickly adapting to this relatively new concept as many new prime buildings like One Hennessy now prefer to include shared working spaces into their tenant portfolio to increase flexibility.
"This way, landlords can provide flexible spaces for potential tenants who don't want to sign long leases, or existing tenants who are expanding rapidly and need additional venues," he said.
Besides Hong Kong, Kr Space said it also plans to enter the Japan and Singapore markets in the near future.
