The co-working market looks quite tough, for at least 2 reasons : - low barrier to entry (easy to rent a large office space and then sub-let smaller spaces), - not that easy to differentiate. I guess that all operators offer both rent + basic services.
Unlike its 2 main competitors (IWG and WeWork), Servcorp has always been profitable (since its listing) and remained net cash. IWG just turned profitable in 2024 and still has a high level of financial leverage.
Servcorp success vs its bigger competitors seems largely due to a much better risk management. A lot of risks in co-working : - risk of non payment* (risky customers, often SME and start up), - ability to manage the level of occupancy (large turnover of customers), - risk of matching profile of lease expiry profile, between the duration of their leases vs landlords and the one of their own customers (apparently, one problem of WeWork was that they had long leases with their landlords, but short leases with their own customers). So, it seems that the best way to manage all these risks is to have a moderate growth of their office spaces, while IWG and WeWork tried to grow fast into this market.
* interesting to note that Servcorp has a negative working capital model due to the fact that they require their customers to pay within 7 days.
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