SINGAPORE (REUTERS) – CapitaLand Commercial Trust (CCT) will lease out 21 Collyer Quay, a 21-storey building in Singapore’s financial district currently occupied by HSBC, to US co-working giant WeWork.

The move marks WeWork’s expansion in Asia. The tower will be WeWork’s biggest property in Singapore and has a net lettable area of about 200,000 square feet.

The lease with WeWork will start in the second quarter of 2021, for a period of seven years, said CCT, without disclosing financial details of the new deal. Its lease deal with Hongkong and Shanghai Banking Corp Ltd, a unit of HSBC Holdings, will end in April 2020.

CCT said that the agreement with WeWork is not expected to have a material impact on its net asset value per unit or distribution per unit for the financial year ending Dec 31, 2019.

Its manager also said it plans to capitalise on the transitional occupancy downtime during changeover of tenants to upgrade the building. It said the expected return on investment is approximately 9 per cent on an estimated cost of $45 million to upgrade the property. The building is valued at $462.2 million as at June 30, 2019.

Co-working spaces have become popular among start-ups because these give them the flexibilty of short-term leases in well-decorated spaces and keep overheads low. Increasingly, larger companies are also using co-working firms to manage their offices.

In Singapore, the flexible workspace footprint has more than tripled since 2015 and now accounts for some 4 per cent of the office space in the central business district, according to real estate consultancy Colliers.

WeWork’s new lease will give it rare naming rights in the country’s financial district, said Christine Li, head of Singapore and South-east Asia research at property services firm Cushman and Wakefield.

“It’s a very good catch for WeWork,” said Li, because typically only a few floors are available in the business district due to low vacancy.

The lease will start in the second quarter of 2020 for seven years, CCT said. WeWork will occupy 20 floors of the building, the US firm said in a separate statement, but did not provide details about the one other floor.

HSBC Singapore said last year that it would relocate its head office to Marina Bay Financial Centre, within the central business district.

Rents for grade A buildings in Singapore’s central business district surged 12.7 per cent last year, Cushman and Wakefield’s Li said.

She expects rents to stay mostly flat this year at the current level of about $10.61 per square foot per month, due to a slowing economy and uncertainties from trade tensions between United States and China.

Founded less than a decade ago, WeWork has locations in over 28 countries, including in Singapore, China, India.

The money-losing firm, which has filed paperwork for an IPO, has faced questions about the sustainability of its business model that is based on short-term revenue agreements and long-term loan liabilities.