Wework – Workspace for Rent
Homebuyers aren’t the only ones stressed today. Proptech startups, entrepreneurs, consultants and other businesses have their own housing crisis. A lack of affordable office space for small businesses is forcing many small business people including Realtors, property managers, landlords and others to work out of their own homes.
While working out of home may have some cost benefits, it doesn’t work well for workers who need to work long continuous hours to get work done. Nor does it provide the social activity and professional connectivity which many productive workers thrive on.
In this post, we’re getting a good look at shared office workspaces or coworking space. It’s a hot trend that provides a much needed, affordable solution and seems to spawn additional, unexpected benefits for SMBs and workers. Home offices are a big benefit for those hunting for apartments or rental homes, yet
The Intense Demand for Affordable Office Space
Offices might be old fashioned however they provide a context and a distraction free work space where we can get things done. New startups are focusing on providing a new approach and a new business model for commercial office developers.
Commercial real estate companies, real estate brokers and property managers are well aware of the shared office trend sweeping the world. Even big corporations with traditional office spaces are affected by this trend.
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“Big corporate clients — tenants who work at companies with more than 1,000 people — now make up 25 percent of WeWork’s membership, up from 17 percent at the same time last year” — report from Rework.net
WeWork — a Notable PropTech Startup
Wework, a New York-based company launched in 2010 responded to the intense need for shared office space, community building and business support. They serve entrepreneurs, tech startups, business incubators, Realtors, property managers, consultants, by delivering the space, community and programming to help their customers succeed.
The company was funded with $2.7 Billion in VC funding and is now valuated at $5 Billion. WeWork is active in real estate with 469 office locations in 91 cities worldwide. It has 268,000 members (2nd quarter 2018). According to Wework, the company is the number one occupier of office space in Manhattan.
My first visit to a Wework location was in downtown Toronto. Wework bought a 6 story building and rehabilitated it into a vibrant collection of small offices and computer workstations, many with glass walls or partions. To me, it seemed an ideal solution and far less expensive than most offices in downtown Toronto.
My client at the time was a real estate developer. The location had the amenities including business services, and coffee stations with food (and even beer or wine). There definitely a vibrancy in the office that makes it much better than a traditional corporate office.
Low Prices but Innovation Coming
We all know about apartment prices in cities like Toronto, Miami, Vancouver, New York and San Francisco, so when a service like Wework appears, it makes a lot of noise in the startup and entrepreneur sectors, where funds are limited.
Observers note that Wework’s business model isn’t really disruptive at this point and that competitors such as Regus haven’t grown. With its new Welive and Wework Labs, the company is hoping for results from innovation.
WeWork’s Amazing Growth
The company is reportedly growing at 111% per year with a $422 million dollar 2nd quarter 2018 revenue as seen in this graphic. It’s growing 50x faster than other shared workspace competitors.
WeWork Workspace Office Prices
Workspaces come in different floorspaces and furnishings. Members can rent private floors, office suites and shared spaces at varying prices. Here’s a few prices WeWork lists:
- Manhattan: starting at $550
- Washington: starting at $400
- Seattle: starting at $390
- Dallas: starting at $325
- Toronto: starting at $C600
- Sao Paulo Brazil: R$700
Why People Thrive in WeWork Workspaces
HBR published a report recently about why people thrive in these shared workspace environments to the tune of an average of 6 on a 7-point scale.
From the HBR report, they found that Wework members:
1. see their work as more meaningful
2. have more work control and freedom 24/7
3. feel like they belong to a community
The value proposition seems to be freedom, flexibility and support and Millennial aged workers love that. Wework is pursuing the “community” experience angle as a way to improve their services and value proposition.
And Wework picks the locations, designs the floor layouts, and some of the settings remind you of Google offices or other exotic high-rise locations with great views.
A Market Worth Keeping an Eye On
The shortage and high cost of affordable office space is creating a booming new market called shared workspaces. Market players such as Wework are innovating and exploring services that office developers and property managers have not ventured into. Wework is definitely entering a phase of innovation that will help it grab a big share of office space rental.
Renting is becoming a big part of many firm’s business model and leveraging the value of coworking spaces is something many property developers will be considering. Wework is just one company exploring this space. Others will expand on services and value propositions.
Not only will coworking space firms move businesses big and small to rent from them, fewer companies will look to buy office space. Wework has the kind of funding that makes everything possible.
For more on the topic please see our post on Proptech startups.
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