When WeWork opened its Shanghai office in early July, it was nearly fully leased almost immediately, so successful has its model been in cities around the world in recent years that Hony Capital and its parent Legend Holdings recently led a $780 million capital raising for WeWork, signalling their intention to help the company expand its hip-office operations across China.

But WeWork is not the only big name player vying for opportunities in the co-working space arena in China. Its success has caught the attention of developers in China keen to emulate its success by turning excess office supply into coworking space.

Using excess space for profit

More on-the-go technology and a shift towards the sharing economy have fuelled the development of co-working offices so young start-ups can work in collaborative spaces without being shackled by long leases and high rents.

Already developers are positioning themselves to cash in on this new way of working among China’s young entrepreneurs. Major office player China SOHO aims to have 100,000 desks in Beijing and Shanghai by 2017 and has signed an agreement with Greenland Holdings to turn excess commercial office supply into co-working space. Vanke too is attracting its share of e-commerce start-ups, while the China Daily reports that there are nearly 1,600 competitors on the horizon.

WeWork faces stiff competition from existing developers in China who own a huge inventory of office stock that can be chopped up into smaller workspaces and leased for short periods in the new coworking model.

James Allan, JLL’s Regional Director and Head of Markets, Shanghai, says that Chinese developers and landlords are seeing coworking spaces as a way to lease out excess office supply. “Leasing to coworking spaces usually requires at least a couple of thousand square metres, and this benefits landlords who want to reduce void periods and secure stable rental income,” he says.

Allan notes that some developers have already or will soon consider investing in their own coworking brands in order to benefit from a start-up boom in China

“Since 2015, co-working operators have flowered across the major Tier 1 and Tier 1.5 cities in China such as Shanghai, Guangzhou and Shenzhen. Some big real estate names have set up their own co-working brands such as SOHO China’s 3Q,” Allan says. “Naked Hub has also emerged as a major co-working operator in Shanghai, opening 12 centers in 2016.”

Tapping into a hot trend

Developers are benefiting from the Chinese government’s focus on mass entrepreneurship and innovation. A relaxation of restrictions on business in 2014 saw more than 1.8 million new companies registered in the six months after the new laws were introduced.

The changing nature of employment has created a whole breed of freelancers and tech start-ups popular among millennials who, rather than being shuffled into lower grade buildings, are opting to combat steep costs in office rent in places like Beijing and Shanghai through shared space.

“Co-working is bringing new start-ups into grade A office spaces and the market will only get bigger,” says Allan. In China, the Western coworking model has been adapted for the local market. As Chinese users prefer more privacy. WeWork’s Shanghai offering for instance, breaks up the space into small individual rooms or other spaces, as well as encouraging the tradition of an after-lunch nap.

However, like all coworking models its big selling point is still that it appeals to the core values of the start-up tenants. “Co-working spaces create a sense of community and support interaction between different companies. They are also a way to save on costs by sharing resources as well as exposing tenants to investors,” says Allan.

With the foundations of coworking now set in the Chinese market, more of China’s cities could soon be sporting their own network of coworking spaces. As global chains such as WeWork start building their presence, the popularity of the coworking model remains on an upward curve among landlords and entrepreneurs.

This article was originally published on JLL Real Views, JLL’s news site exploring the big trends shaping the real estate industry’, with ‘Real Views’. www.jllrealviews.com. Reprinted with permission.