Kr Space is shutting down its last co-working facility in Hong Kong, ending its ill-fated expansion in the city.
The Chinese company, a spin-off of technology platform 36kr.com, confirmed that it had decided to close its 34,000 square feet flexible office centre spread over two floors in Times Square, in the protest-hit district of Causeway Bay, just over a half a year after opening in April.
“Despite our efforts, Causeway Bay centre’s business did not meet our targets of freeing up cash flow and making a profit by the end of this year, so we decided to close it,” said a Kr Space spokeswoman.
“We are in talks with the landlord about the exact date to terminate the lease and the compensation due to the early surrender,” she said, adding that the company was hoping to keep the loss to a minimum for both sides.
Hong Kong developer Chinachem sues co-working operator Kr Space for failing to execute One Hennessy lease
Wharf Real Estate Investment Company, which owns Time Square, did not comment on Kr Space’s decision to terminate the lease. The two companies also declined to provide details about the terms of the lease.
When a Post reporter visited Kr Space on the 34th floor in Times Square on Friday morning, it was quiet, with two employees manning the reception desk and one in the bar area.
The staff said they were preparing to move out in the next few days and all tenants had left.
The company, referred to as “China’s WeWork”, made its foray into Hong Kong in May last year, signing up seven floors, or 83,000 sq ft, at the as yet unfinished One Hennessy in Wan Chai. It then actively approached landlords of prime office towers in Hong Kong’s main districts, including Wharf’s Times Square, New World Development’s A11 Atelier in Tsim Sha Tsui and The Centre in Central.
However, in April this year the wheels began to come off for Kr Space as it backed out of a lease with Chinachem Group for One Hennessy, citing a tough operating environment in Hong Kong. Chinachem in turn filed a lawsuit claiming HK$500.9 (US$63.8 million) in damages for breach of contract.
Although the Times Square exit leaves Kr Space with no operations in Hong Kong, the Beijing-based company said it was still looking for opportunities in the city using an alternative strategy.
The Kr Space spokeswoman said that its asset-heavy model – long-term leases and interior decoration costs – had weighed on its operations.
“We will shift to an asset-light model. For example, we’d like to cooperate with landlords,” she said.
The crowded flex space sector in Hong Kong is witnessing a major shake-up, with many players, big and small, walking away from their leases.
Cash-strapped WeWork is considering giving up a portion of a recently signed lease in Wan Chai, near Hong Kong’s central business district.
“We do expect some locations to either close, re-gear or be taken over in the next 12 to 24 months,” said Jonathan Wright, head of flexible workspace services at Colliers International Asia.
More from South China Morning Post:
- Exit Kr Space, enter CEO Suite; Indonesian co-working space operator swoops in to take space vacated by troubled Chinese rival
- Co-working space operator Kr Space doubles down on Hong Kong with second location … even before the first one opens
This article Chinese co-working operator Kr Space gives up Times Square facility, retreats from Hong Kong first appeared on South China Morning Post