SoftBank may invest $3B in WeWork, signals rise of co-working spaces

America-based co-working or shared work space provider WEWork is all set to raise $3 billion from SoftBank, at a valuation of $17-20 billion, say media reports.

This is an interesting development as the company plans to expand globally and India is going to be a major focus market.

India has nearly 30 co-working centres with an average area of 5,000 sq. ft. Builders in the country are looking at this trend as a viable option to increase the value of their assets.

In the recent past, a boom in entrepreneurship has been followed by the rise of companies such as The Place, The Hive, 91 Springboard, Innov8, and InvestoPad. These companies serve startups on a per-seat model and charge them around Rs 7,000-10,000 depending on the suite of services offered.

The Indian Brand Equity Foundation (IBEF) says that an estimated $25 billion has flowed into Indian real estate in the last 15 years. Commercial real estate is performing better than the home markets in the country since salaries have not gone up over the last couple of years. Besides, bank interest rates have remained high. So, instead of leasing an office with debt money entrepreneurs chose to work in a shared work space.

So based on these numbers, WeWork can expand in India across cities like Bengaluru, Delhi, Mumbai, and Pune. The company currently has operations in 15 countries and 150 locations.

Earlier, the company raised close to $1 billion from Goldman Sachs and other investors. The investment from Masayoshi Son is part of the $50 billion committed to the US.

The profitability of co-working spaces is completely dependent on the growth of the economy and the freeing of capital from investors. Only time will tell if this model is a good real estate asset class for investors.