By Wu Yiyao in Shanghai
Small businesses subscribe to the concept of xindanwei in Shanghai
In an office in downtown Shanghai, a product manager sits beside a painter, while a program developer discusses his new project with a language teacher. Just around the corner a couple is hosting their wedding party which many people in the same office were attending.
One may wonder what sort of company can organize an office like this with such a variety of professionals gathering in one work unit, or xindanwei, to conduct totally different business every day.
Xindanwei refers to a micro working space which could be as small as only a place for desk and chairs. The concept is proving to be well received by small individual businesses striving to survive in the current high rental situation in Shanghai.
Being the first of its kind in China, xindanwei offers affordable shared space for small and tiny businesses and startup entrepreneurs who want to lease desks and chairs. By becoming a “chair member” at a cost starting at 500 yuan ($79) a month, one can work in a shared office in one of the three xindanwei properties and join a community that hosts freelancers and business people of different expertise.
People from almost every track of life work under the same roof find inspiration and solutions.
A chair member can also have access to meeting rooms, catering and other services for an extra charge.
Stfanie Valle, an artist from Canada, said in a talk shared with chair members that co-working is a component of success for this stage of her journey in Shanghai. It stimulates ideas and enables her to have companions and fun in a working environment.
“Co-working enables me to have an open heart, a completely open heart,” said Patric Cai, 42, who was then China chief executive officer at Sage Software, speaking in a video made with other chair members.
In recent years Shanghai has introduced several favorable policies to startup enterprises, especially micro-sized and small ones. Many people in Shanghai, Beijing and Guangzhou, especially young people who have just left college, are thinking about starting their own businesses.
However, rent for office buildings, which accounts for a large portion of costs, is quite often too expensive for small businesses.
In the second quarter of 2012, average rents of grade A office buildings in Shanghai saw 4.08 percent year-on-year growth, rising to 6.8 yuan a square meter a day, with growth in Jing’an, one of Shanghai’s busiest downtown areas hitting 13.26 percent. The vacancy rate of grade A office building in Shanghai in the first six months of this year is about 8.81 percent, according to DTZ, one of the largest property services companies in the world.
Even in some creative industry cluster parks in Shanghai, which offer leased offices at a price lower than the city’s average, a 100 square meter office may cost up to 12,000 yuan a month, according to loft-sh.com, a Shanghai-based office leasing information website.
When Liu Yan, CEO of Xindanwei Co, and Chen Xu, Xindanwei’s chief financial officer, returned from their studies abroad in late 2000, they thought about setting up a shared space for startups which are similar to the shared offices that have been popular in Western countries for years.
The pattern of co-working originated in Silicon Valley in the United States and has been developing well in some European countries, such as the United Kingdom. In a shared office, freelancers, craftsmen and business teams with fewer than 10 staff members can work under the same roof and share many essential facilities such as meeting rooms, presentation equipment, maintenance services and catering without renting an entire floor or a whole office.
Co-working requires a strong awareness of the demands of sharing, cooperation and an open-minded nature,” said Chen. When Xindanwei started three years ago, up to 90 percent of members at that time were expatriates and only 10 percent of members were Chinese startup entrepreneurs.
Now the ratio is about half and half. Chen said co-founders are quite happy with the situation.
“Our goal is to bring communities together, to make Xindanwei a window to businesses from other countries and also a link to the world for Chinese startups,” said Chen.
In 2009 when Xindanwei Co opened its first property for rent, only 15 percent of spaces were leased out. Now it is 90 percent in three properties featuring business clusters of art, ecological design and health-related industries. Another one is going to open later this month at Sinan Mansion based on space design.
“We are looking to managing communities and achieving sharing and mutual inspiration on the greatest scale,” said Chen.
Alongside renting space, Xindanwei runs a series of events for members to meet new people, explore new business opportunities and get inspired by those who have already succeeded.
Xindanwei hosts a weekly gathering every Friday at which the public is invited to hear from experts in various fields such as social sciences, space design, urban planning, artists and program developers who are willing to share their learning and give presentations on whatever topics the co-workers find interesting and informative.
For property managers, the other side of the co-working coin is the high turnover of tenants, which is problematic for cash flow.
“Every month we have new people join us but some move out because they have grown large and need more spacious places. Some projects are suspended so some people leave, which sets a significant challenge for our cash flow,” said Chen.
“It is quite a creative idea to make the office smaller and segmented and, if some creative industry clusters and parks borrow the pattern, it may change the story of office buildings in Shanghai,” said Zhang Hailiang, an analyst with Xinyuan Property Agency in Shanghai.
A risk for such realty usage is that other owners of property may copy Xindanwei Co’s business model. If they have better locations and stronger financial power, they may represent fierce competition, said Zhang.
Also, because all the properties are leased from other owners, the risk of landlords defaulting must not be ruled out.
Chen said Xindanwei Co is considering cooperating with international companies and, if possible, local authorities to see if Xindanwei can be upgraded to a powerhouse of sources so when a foreign firm wants to open an office in Shanghai, Xindanwei can be its stepping stone and a base for early operations.
To expand its services and make further connections, collaborations, networking and sharing of ideas, Xindanwei introduced several value-added services to members, including xinguwen, a business consulting service for newcomers that enables members to have easy access to information concerning research, development and marketing of their services and products.
The consulting service now accounts for about 10 percent of Xindanwei’s monthly revenue, said Chen.
Aaron Kowalski, a 30-year-old startup entrepreneur in Shanghai, is one of the co-workers at Xindanwei. As a general manger of Intelamatrix China, a product and service utilizing ultrasound technology for commercial and personal use, Kowalski is looking forward to opportunities to promote his products in China. Kowalski started working at Xindanwei at the end of May.
“My working environment before then was either from my apartment or a Starbucks outlet. In those environments, although I have the best intentions to work hard, it’s easy to get discouraged and down on yourself and not feel like you are accomplishing anything. Renting a space and legitimizing our company has become a natural progression,” he said.
It is fantastic to be a co-working member, said Kowalski, not only to be working with like-minded people, but like-minded people in the same industry.
“Who would understand your pains and struggle anywhere else?” he added.