Small businesses seek less room to maneuver
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China Daily, October 31, 2011
Shi Lijuan was almost at her wit's end when she went looking for office space for the company she partly owns, Beijing Yongcheng Law Firm.
As a small enterprise with just 10 members of staff, she only needed about 40 square meters of office space. However, every landlord she spoke to was only prepared to rent out 200 sq m and, in some cases, a minimum of 500 sq m. Contracts for just one year were also out of the question.
"After a futile search lasting several months, I eventually heard about some companies that supply small workplaces in high-end office buildings to entrepreneurs such as me," Shi said.
The businesswoman has now been the proud tenant of a 40 sq m office in the NCI Center in Beijing's central business district since February, 2010.
Her landlord rents workplaces in office buildings from owners or managements and then sub-lets to people who need small workplaces, sometimes on a temporary basis.
Unlike building owners, these suppliers divide workplaces into small units and welcome small enterprises. However, the price they charge is not so small.
Shi pays 15,000 yuan ($2,349) a month for her offices - about twice the rate it would have been had she been able to rent directly from the building's management.
Nonetheless, Shi said it is still a good deal because her small firm is located in a grade-A office building in the heart of the city.
"We offer an opportunity to small enterprises that high-end office building managements do not," said Zhang Peng, China's area director for Regus PLC, the world's largest workplace supplier by market value, based in Luxembourg.
Most of its customers are small and medium-sized enterprises that require flexible contracts, Zhang said, adding that lease terms can be anything from one day to one year and customers can rent workplaces of different sizes from just a seat and desk to an entire floor.
Several workplace suppliers based overseas entered the Chinese market in the mid-1990s and have recently expanded fast.
Regus, which has more than 1,100 business centers in 500 cities and 88 countries, entered China in 1995 and now operates 45 business centers in 10 Chinese cities.
"The average usage of our nine centers in Beijing is about 96 percent," Zhang said. "That means demand exceeds supply in what is a large market."
Hans Leijten, regional vice-president of east Asia Regus, said: "We expect demand for our workplace solutions to rise further and we intend to expand our presence in China's big cities and second-tier cities."
Servorp Business Service Co Ltd, the world's second largest workplace suppliers by market value, which is based in Australia, has seven business centers in China and will soon launch a new one in Guangzhou.
"China is such a large market, although traditional Chinese businessmen want to have workplaces on their own and we have to try our best to persuade them," said Michaela Julian, senior manager at Servorp China.
Rising rents play a role in demand in addition to economic growth.
ZZA Responsive User Environments, a research and advisory company based in the UK capital London, released a report on Oct 24 that shows 62.3 percent of its respondents in China use business centers for some or all of their work. The global number is 52 percent.
The report also revealed that business centers are used more than non-office working places such as home and coffee shops.
"The trend is that third-place workers (those not working from a company's headquarters or satellite office) are moving to business centers, away from their homes," said Ziona Strelitz, founder of ZZA.
Statistics from the China Office Research Center show that by June 30, rents for office buildings in Beijing increased by more than 30 percent on average over the previous six months. Some buildings saw rises of 50 percent.
Demand is also being fueled by reduced property costs.
The biannual Regus Business Confidence Index, released in September, shows that 83 percent of respondents expect their revenues to increase over the next 12 months, but 73 percent of them plan to cut or freeze their property costs to remain competitive.
"We liberate companies from the need to plow money into expensive fixed property deals, while offering them the freedom to expand," said Leijten. "That's why we are seeing rising demand for workplace solutions."
Customers can move into new workplaces just taking their computers as soon as they have signed contracts and do not need to spend money on ancillaries such as decorating and furniture.
Suppliers also deal with daily administration affairs at the offices, including providing a staffed reception desk and cleaning.
All the customers share the administration costs, which can reduce daily expenses, Zhang said.
"Our customers can save about 70 percent of the cost of a workplace, generally speaking," Zhang said.
Bigger, transnational corporations also use workplace suppliers when they open branches in new countries and regions.
Magme, a website founded in Canada that provides free online reading, set up its Shanghai operation in 2009 in the Regus' Bund Center site.
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