Most people will be aware of the American serviced office operator ‘WeWork’ and some may be aware that it issued an IPO prospectus in August from which it hopes to raise $3.5bn.
Those of us in the property industry cannot fail to have noticed how We Work has become Central London’s largest office tenant in less than 10 years and reportedly occupies 808 offices in 124 cities worldwide whilst also losing $1.9bn on turnover of $1.8bn in the 2018 financial year.
Curious to find out what is driving the growth of this American behemoth, I went to visit their latest property at 51 Eastcheap in the heart of London’s insurance district. I was particularly interested in this property as I spent 3 years appointed as the Law of Property Act Receiver of this 80,000 sq ft office building following the GFC and worked with developer Stanhope to plan the refurbishment of this building.
On arrival I was immediately struck by two things. First, the sparsity of the fit-out, exposed structural concrete and building services throughout, and second the ‘buzz’ from a large group of millennials working at communal desks – mostly on Apple laptops.
This was the ground floor hot desking area where the right to use the facilities and to work at a hot desk can be rented by the month. However, as my tour progressed up through the eight floors of the building, the environment became distinctly more corporate as I found tenants occupying a range of partitioned offices from small one person offices to entire floors of up to 80 people. At 51 Eastcheap, many of these tenants were bona-fide insurance companies and I understand that We Work’s largest tenant worldwide is in fact HSBC.
With a valuation of $47bn WeWork appears to have been valued more like a tech rather than a property business given it is yet to turn a profit. WeWork’s business model is essentially to arbitrage the rent it pays for office accommodation but it is tech focused, particularly for a property business, and reportedly uses the significant information it collects from its tenants to optimise its use of accommodation and the services it provides.
What is also different to the traditional serviced office operators, such as Regus, is the curated communities in each WeWork building and city where tenants can benefit from a wide range of ‘value-add’ services. Healing Meditation, Skin Speed Dating, Sunrise Yoga and Manicures were just some of the offerings at Eastcheap last week. For some, the offer of free beer and cider after 3pm is no doubt a further attraction although I was able to establish that each location is limited to a certain number of barrels each week!
In conclusion, I can certainly see the attraction of the WeWork concept to a wide range of fledgling and established businesses, but whether its phenomenal growth will continue is less certain.