Co-working space operators such as WeWork are facing increasing competition in the booming sector, and it's not just fellow service providers like Regus that are a threat to their market share — even property developers are getting in on the action.

For example, integrated real estate company Kaisa Group Holdings opened its first co-working space in downtown Shanghai on June 15. This is the conglomerate's first attempt at combining co-working services with a shopping mall.

A month ahead of this opening by Kaisa, Singaporean developer CapitaLand Group unveiled its own co-working project in northeast Shanghai.

Puah Tze Shyang, CapitaLand's chief investment officer in China, said that they would open up more co-working spaces in their office buildings in Shenzhen of Guangdong province, Shanghai and Beijing in the near future.

To Lim Ming Yan, CaptiaLand Group's chief executive officer, the reason for this is simple: their client demands are changing.

"As a developer, we should provide more than just an office room. We should develop our own management team and improve services as our clients are looking for co-working spaces and stressing more on technology, flexibility and community connection," he said.

Well-established Chinese property developers already started rolling out co-working spaces in recent years. In July 2015, Shenzhen-based Vanke Group launched its first co-working space in Guangzhou, Guangdong province. This year, it entered a strategic partnership with Ucommune in March in the hope of creating a complete ecosystem for their co-working services.

Beijing-based developer SOHO China Ltd also introduced its co-working brand 3Q in Beijing in February 2015. Ucommune, one of the biggest co-working space providers in China, was launched two months later.

With only four years of development, SOHO 3Q — it is the shared office space arm of real estate company SOHO China — has penetrated 12 cities with 79 co-working projects.

By the end of this year, it would have introduced more than 50,000 co-working positions to China.

The long-term goal for 3Q, according to SOHO China executive chairman Pan Shiyi, is to become China's largest comprehensive office building service provider. During a business development meeting held in Beijing on June 20, he said that 3Q will go public next year.

Profitability is one of the major reasons why property developers are tapping into the co-working industry, said CapitaLand China's CEO Lucas Loh Jen Yuh.

According to market consultancy Frost & Sullivan, co-working will become a major business model for office building leasing in China by 2022, as the sector will absorb up to 16 percent of commercial office space by that time.

In addition, the co-working industry will register a compound average growth rate of 50 percent by 2022, with total utilized area amounting to 78.9 million square meters.

Vicky Shen, the head of global real estate service provider Cushman & Wakefield's Office Agency China, said that developers in China have become increasingly intrigued by the co-working office concept.

"Many see partnering and leasing some of their office spaces to a co-working operator or self-developing a co-working space as a viable business proposition," she said, before explaining that property developers view having a large number of co-working brands in their buildings as a means of boosting their brand image.

For potential tenants, co-working has now become a major attraction as such spaces provide more room for communication and business opportunities. Under such circumstances, tenants are more willing to renew the lease ahead of time, said Shen.

"From a wider perspective, the large number of members of co-working facilities will help increase the daily flow of consumers at the developers' commercial complexes. The business atmosphere will be more vibrant and therefore the developers can increase their properties' value in terms of rent, profit and commercial value," she added.

But Pan, who has more than 30 years of experience in the Chinese property market, pointed out one problem that most co-working operators have to address: the short lifespan of Chinese SMEs, which currently make up the majority of co-working tenants.

China's central bank governor Yi Gang said during the 10th Lujiazui Forum in mid-June in Shanghai that the average lifespan of a Chinese SME is only about three years.

With this in mind, co-working space operators will find it difficult to further increase their occupancy rate as SMEs come and go more frequently than matured companies, added Pan.

The current occupancy rate at 3Q co-working spaces is around 88 percent. Pan said the company is eyeing a 100 percent occupancy rate by providing customized services to larger corporations in the future.

The development of the industry is like the change in seasons, the less healthy companies and business models should be screened out so that the industry would be able to experience sustained growth, he said.