JustCo Holdings

[weijian]

Most VBs should not be unfamiliar with the economics of flexible work space providers since most of us probably read a bit about the excesses of WeWork and how Masayoshi Son encouraged Adam Neumann to dream big.

Corporate Monitor has come up with an article on a recently IPO-ed company JustCo Holdings, a flexible work space providers, and flagged out potential issues with its business model - mainly fixed lease payments that has the potential to suffer severe negative operating leverage in the event of a downturn.

IMHO, this model of "lease long term + rent out short term" is just fine because most businesses have some sort of operating leverage in it. For example, banks do the sort of arbitrage via "borrow short term + lend out long term". Some of the co-living operators which also recently IPO-ed are looking just fine with this asset-liability duration mismatch as well. But I do agree JustCo has an issue, just not with the business model but the type of customers that such a model attracts. For a start, most big enterprises will only rent with JustCo if they need some sort of temporary office space. As JustCo helps businesses save on office CAPEX, it will be attracting businesses with less financial power + small teams of people (startups, entrepreneurs etc). Therefore, in the event of an economic downturn, no surprises that JustCo's customers will probably experience a much bigger impact than the typical office landlord.

JustCo Holdings – Not Just Another WeWork?

It is not surprising that investors compare JustCo to WeWork, as both share the same business model: sign a long lease with a landlord, spend on renovation, rent out workstations on shorter and flexible terms, and earn the rental spread. There are inherent mismatches of fixed cost versus flexible revenue, long liability versus short visibility.

The flexi-office business model carries high operating leverage, given that its costs are mostly fixed. In 2025, cash lease expenses alone accounted for 64% of JustCo’srevenue. Other operating expenses are mostly fixed too. In a rising market, JustCo will do very well, but in a declining market, JustCo will do poorly.

https://corporate-monitor.org/justco-hol...er-wework/

[LionFlyer]

I just changed jobs, and my new "office" is a JustCo unit in town. Some observations:

• It tends to attract smaller companies or those that just started. E.g my current company (billion dollar US firm) started in Singapore 2 years ago. JustCo was a convenient, flexible option since we can "upgrade" easily. The firm did this thrice, and two weeks ago, we moved to a different floor because we needed more space. Some of my neighbours are 3 person companies, but I also have a brand name recruiter in my current floor.
  
  
• JustCo allows tenants like us to use their other offices across the island. It came in handy when I am at a different part of Singapore and was too lazy to head back to the CBD. However, their premium option ("the Collective") is not accessible by normal tenants.
  
  
• Tricky part for them is partitioning the floor space for maximum occupancy rate. Too many smaller units is difficulty to rent out. Too many bigger units faces similar challenges. The big unit opposite my current office is empty. Fantastic view but probably significantly more expensive due to that. My previous unit was a 10 pax office; and that row is largely vacant now. There was one company there (Asset Manager) that was renting multiple smaller units, but those are rare. 
  

Personally, I think the idea of a serviced office fits certain needs and the convenience cannot be underestimated. In one of my previous job/company, I was very involved in looking for our next CBD office as part of the mgmt team. Gotta deal with reinstatement cost of the old office (e.g teardown), gotta deal with reno of the new one, getting the cleaning services (building didn't provide). We even had to rent the plants (with watering service)!

However, I agree with your points. Regardless of the occupacy rate, the JustCo still has pay the same rent to the building owner and it is dependent on the business climate. When business is bad, CBD rents goes down, it make sense to rent directly and cut a longer term deal, which was what I did previously.

Edit: I had visited WeWorks multiple times (client occupies 2 floors there), the Great Room (very classy premium work space, hosted a client event there)

[specuvestor]

yes seems more attractive for start ups but they do have Nvidia and OpenAI as well. Their lease is 5+5 years or 3+3+3 years also possible

My bottomline is what happened during COVID: occupancy down to 60% with 0.2% bad debt

Rent long term lease short term is like banks lend long borrow short. Inherently there is going to be a mismatch if you don't actively do ALM: that's basically what killed WeWork and banks during crisis. But the company net cash is assuring.

Looking at EBITDA doesn't make sense cause all the lease payment is under depreciation under new IFRS 16. On a profitability basis with all the ramp up capex probably can see profits coming in 2H27 as occupancy ramps up offsetting "depreciation".

[dzwm87]

One interesting point from Corporate Monitor's report is that the advertised unit economics of cash ebitda breakeven is less than 12 months (8 months if I recall correctly) but JustCo as a group has barely made any profits. Perhaps, the initial ramp up to X% occupancy is fast but like LionFlyer's observation, the incremental X+n% onwards tend to take longer to fill up. First few batches of tenants choose the best units and the remaining ones become more selective. In order words, operating leverage might take a while (i.e. a few years) to realise.

Another point is that the 3 years leading to IPO barely had any organic expansion except the consolidation of its (mature) Japan operations. Gestation losses from any expansion were not reflected here. Yet post IPO, they are guiding to almost double their footprint.

Putting both together suggest at least any meaningful increase in profits might take a long while.

[weijian]

yes seems more attractive for start ups but they do have Nvidia and OpenAI as well. Their lease is 5+5 years or 3+3+3 years also possible

Hi specuvestor,

I am pretty sure JustCo (and other co-working space operators) have the bluest of tenants. The key question is the size of their ops and future intent. Coincidentally, BT reported on Revolut's Spore expansion - The UK digital bank doubled its headcount in 2025, and would be looking to roughly double it again by end 2028. Let's assume a headcount increase journey as above:

80 employees --> 160 employees --> 320 employees

Essentially, co-working space operators will huat big big when your tenant is successful in its initial stages (increasing headcount from 80 to 160 employees). But when the customer is "too" successful and continues to expand (from 160 employees to 320 employees), it will ironically lose the business totally.

Revolut to set up CBD office in Collyer Quay, puts S$350 million into Singapore expansion

[SINGAPORE] After seven years of operating out of co-working spaces, global digital banking and fintech platform Revolut is setting up a permanent office in Singapore.

Slated to open in early 2027, the 8,880 sq ft space in Collyer Quay Centre anchors a S$350 million investment, which the UK-headquartered company has committed to the Republic over the next five years. The Collyer Quay lease will support Revolut’s plans to grow its local workforce to more than 300 employees in the next three years.

The company, which grew its headcount by 95 per cent in 2025, now employs about 170 staff. Hiring will focus primarily on engineering, product management, data science and artificial intelligence.

https://www.businesstimes.com.sg/compani...-expansion