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I've been involved in real estate and the coworking scene in Shanghai for the last 3 years and you've hit the nail on the head. Customer retention is even wors

I've been involved in real estate and the coworking scene in Shanghai for the last 3 years and you've hit the nail on the head. Customer retention is even worse here, as so many spaces keep opening up and offering huge discounts to move in. At first WeWork kept their price the same at an average of 3,000RMB desk/month (600AUD per month), then local competition came in at under 2,000RMB, then WeWork did 3-6 months free rent incentives, 25% broker commissions etc, opened around 30 (?) spaces in 2 years. Now the average price of a desk is around 2,000RMB at WeWork, local competiton is under that, and brokers still get 15%. The Tenants know how much power they have in the negotiation as it's all a big competition between coworking operators. Who's winning in this? Landlords, Tenants and Brokers.

Traster 7y ago
I don't think Landlords are winning from this. In fact I think it's interesting that this dynamic is actually going to hose landlords the worst. Right now we have a situation where companies like WeWork are creating huge amounts of demand by offering extremely low rents to tenants on short leases and renting spaces from landlords on long term leases at high prices. This is stimulating the creation of more office space. If this continues for a long time, great landlords are rolling in it! But if we're right about how this is going to go - these companies are going to run out of money, and when they do run out of money, they're just going to fail to pay those long term leases. The landlords are the ones left holding the bag - they'll have a load of office space with broken contracts, that there's no demand for, because all the demand was stimulated by renting it out at a loss. At that point the bottom will fall out of the market. Landlords will be stuck with a load of broken contracts, tenants will have unrealistic expectations and demand will collapse as people go back to working in cafes etc.

Traster 7y ago

I don't think Landlords are winning from this. In fact I think it's interesting that this dynamic is actually going to hose landlords the worst. Right now we have a situation where companies like WeWork are creating huge amounts of demand by offering extremely low rents to tenants on short leases and renting spaces from landlords on long term leases at high prices. This is stimulating the creation of more office space. If this continues for a long time, great landlords are rolling in it! But if we're right about how this is going to go - these companies are going to run out of money, and when they do run out of money, they're just going to fail to pay those long term leases. The landlords are the ones left holding the bag - they'll have a load of office space with broken contracts, that there's no demand for, because all the demand was stimulated by renting it out at a loss. At that point the bottom will fall out of the market. Landlords will be stuck with a load of broken contracts, tenants will have unrealistic expectations and demand will collapse as people go back to working in cafes etc.