Since its launch eight years ago, co-working company WeWork has become a force in the real estate market. Founded in 2010 by US-based Adam Neumann and Miguel McKelvey, the company has become one of the world’s most active investors in commercial real estate, valued at about $20bn.
WeWork is already London’s largest office occupier, and one of the largest in New York, where it started up – but it wants to be more than just a property company. “We are changing the way in which people work,” says Leni Zneimer, general manager for WeWork UK & Ireland.
Taking on the world
The company is betting on creating workspace designed to make users happier and more engaged – and thus more productive. Its locations feature amenities and services tailored to modern, mobile workers and are designed to promote a team culture, with events spanning from workshops to thought-leader panels and cheese tastings (with free beer).
Analysts still see risks in a business offering short-term office space – memberships can last as little as one month – against long-term liabilities, but that has not deterred investors. Japanese Softbank spearheaded a multi-billion dollar cash injection in mid-2017, for example, which made WeWork as bold as ever about its future.
“We expect to see WeWork locations in every market around the world one day, because we reflect a bigger shift in the way the world is working,” says Ms Zneimer.
WeWork is already operational in 200 physical locations in more than 65 cities and 20 countries around the world, providing some 175,000 global members with space, communities and services. While the US remains the company’s main market with 125 locations in 23 cities, its overseas growth dramatically accelerated in 2017, when it announced up to 65 projects worth almost $3.6bn – twice as much as in the previous three years.
This is second only to market leader Regus in the commercial real estate sector, which is also aggressively growing its co-working company, Spaces, according to greenfield investment monitor fDi Markets.
In London alone, WeWork has rented more space in key office districts since 2012 than any other company (Google and Amazon trail at a distance) and is the city’s biggest office occupier after the UK government, according to a mid-2017 report by estate agency group Cushman & Wakefield.
After securing the $4.4bn cash injection from Softbank and its Vision Fund in August 2017, the company appears committed to deepening its Asian footprint. In January 2018 alone it announced four new locations in Japan, three in South Korea and one in India.
The company’s investment firepower is growing hand in hand with the reach of its ambition to disrupt the way people work and interact with their work places, mostly targeting an expanding pool of flexible talent working in start-ups and SMEs in major urban areas across the globe.
“We spend the majority of our lives in the workplace, so we should have positive experiences here where we feel like we’re learning, growing, changing and having fun,” says Ms Zneimer. “Community is key to creating a fulfilling workplace. WeWork’s mission, values and product all hinge on building strong communities where people can live, work and play. We believe that when designing, community should always be in mind.”
WeWork’s locations combine modern office spaces with a wide range of workshops and events, as well as the offer of business services where WeWork leverages its brand to team up with human resources and healthcare services providers to save its SME members both time and money. The company continuously uses technology to make its flexible office space a better fit for members.
“WeWork is using technology to identify the needs of people and space, understand what makes them happy, and design spaces that support these desires,” says Ms Zneimer. “We want inhabiting a workspace to be seamless and enjoyable for our members and employees and we’re using tech to achieve this objective.”
WeWork is leading the pack of co-working companies that are trying to disrupt traditional commercial real estate. In London alone, co-working companies made up more than 21% of office space take-up in 2017 and WeWork was responsible for half of that, according to figures from Cushman & Wakefield.
The model is not risk-free, however; observers estimate that co-working companies need to reach an occupancy rate of about 80% to be profitable. Co-working companies are also particularly exposed to local economic cycles. They have usually signed long leases for a property and other long-term financial commitments involved in developing it from scratch, whereas their tenants can drop out at short notice fairly easily.
However, there may still be plenty of room for growth as the market is still in its infancy and the millennial generation is expected to drive a cultural shift in the way people do business and work. Although London is the global leader for flexible workplaces both in terms of number of operations and space, the overall offer of flexible office space across the city does not go beyond 4% of total office space, and that market share could increase to 10% in the next 10 years across the UK, according to Cushman & Wakefield.
Outside the UK, major start-up hubs in Europe and Asia have yet to catch up despite the increasing number of start-ups and entrepreneurs growing in their ecosystems. “WeWork has set the benchmark, but others are following in its wake,” the Cushman & Wakefield report concludes.
Traditional operators are already making some of their office space available under flexible terms. Other businesses (such as retailers, pubs and hotels) may soon follow the move by cafes to successfully turn available places into a hot desk for flexible workers.
Meanwhile, WeWork will plough ahead with its global expansion – although the company is already looking to disrupt other real estate sectors. Currently, a prototype is being built in Chicago under a shroud of secrecy – for a co-living space.