The US office space-sharing company WeWork is reportedly considering scaling back its business in China due to the ultra-high vacancy rates in Chinese key cities, as the once-gilded startup has been undergoing a dramatic fall and China has grown as one of the firm’s worst-performing markets, Financial Times reported, citing sources close to the matter.
After entering the populous country in 2016, the Chinese subsidiary of WeWork currently operates over 120 buildings in at least 17 Chinese cities, including Beijing, Shanghai, Guangzhou, Chengdu, and Xi’an.
Despite the expansion spree, WeWork has seen the occupancy rates of some of its China’s desks, Xi’an in particular, slipping to under 78.5%, even after offering big discounts for space. A private office in Xi’an was granted for less than half the price of other cities, for as low as RMB 1200 (USD 300).
Other cities also underlined a poor performance. In Shanghai, its first stop in China, where the company has 43,600 desks, the vacancy rate reached 35.7% in October, while in Shenzhen, 65.3% of its 8,000 office desks were unfilled. Overall vacancy rates in Chinese cites sloped to 21.5%, commercial property group CBRE data revealed.
The company is now evaluating closing some properties in China. WeWork is also planning to rescale its operations in other parts of Asia and Latin America, and cut as many as 4,000 jobs as part of a company restructuring plan.
Globally, the company is projecting to boost occupancy rates to above 90%.
In July of 2018, WeWork’s Chinese subsidiary, WeWork China, raised USD 500 million in a Series B round, led by SoftBank Vision Fund, Temasek Holdings Private Limited and Trustbridge Partners, among others.