The Property Industry Is Falling Out of Love with WeWork
bloomberg.com
bloomberg.com
The facilities are noisy, distracting, totally unusable to discuss anything that is even remotely confidential and there is a reasonably high amount of theft by walk-ins that make off with people's laptops or phones.
The sooner they bugger off the better.
* Their network was grossly misconfigured and directed traffic to the least used access point, regardless of the distance. It was a regular morning ritual for people in my office to toggle their wifi on and off repeatedly until they got a usable connection.
* Network security is also a joke- they have a simple WPA2 shared password that never changes, can easily be brute forced, and is the same at all locations. They do have a proper WPA2 Enterprise setup for their employees, which means the issue isn't their equipment and that they understand the difference between the two.
* They basically have no rules about noise. Their contract refers to the local "communities" rules, but when I asked for them I was told they didn't have any. So when there was bad behavior (which there was plenty of) there was no recourse.
* It was the noisiest office space I've ever worked in. The glass dividers between rooms and open ventilation systems meant there was no insulation from noise at all- and tenants didn't seem to care about letting their entire floor know their business.
* There were only two or three phone rooms per floor, and it was always a fight to get them. People would try and reserve them by leaving their stuff in them before a call, which just amounted to all sorts of drama. Since there weren't enough to go around people would just talk in their offices adding to the noise.
* Allowing dogs is great, but there need to be some rules. One of our neighbors just let his dog walk around the whole floor, so we had to be super careful about what we left in the trash in our unit. He would also leave his dog locked up in his unit while he was getting lunch, and the dog would bark the whole time. People would also have their dogs race from one side of the building to the other. Since none of this was against the rules there was nothing to do about it other than move out.
The lazy jerks running 6th and Market let one of the two elevators sit broken for months. Free 20 minute break mid-day to get downstairs and again to get back upstairs! Who doesn't want takeout to take over an hour every day! The wework folks renting 6 floors just acted like there was nothing at all they could do to get the building to have sufficient working elevators.
And the noise. Hard wood floors. No carpets. Glass walls. One woman wearing heels goes clack-clack-clack up and down the hall.
Bathrooms with no vent fans.
Running a remodel of the floor above us while we were supposed to be working in the office. So much noise you could feel the vibrations.
Same fight for phone rooms.
It was utterly awful. But hey, free beer!
We moved out when employees threatened to quit.
Some American things are funny like free beers but don't you dare smoke a cigarette on the rooftop. Or the communal spaces that are designed in a way that kind of force you to have lunch at your desk.
Besides that the access/egress system is so bad you might as well walk straight through without reporting your presence. WeSuck.
I've worked out of a WeWork office through two different startups and would do so again.
For me it was the ideal way to save on costs with a small team before growing into our own place. It allowed us to forgo all of the generic office management crap and focus on our business.
WeWork offices all seem pretty different to me, so a lot probably depends on where you are.
Also in both cases I opted for the private office setup so noise wasn't an issue.
I wonder what the big customer lease deals with WeWork look like. They probably don't get the markup they do with little tenants.
Deepens? We're not in a recession, and we haven't been for nearly a decade.
It's true that, by historical standards, we're arguably overdue for a recession, but the word "recession" is precisely defined, and the US unambiguously does not meet the criteria for being in one.
There is a non-negligible portion of people who have bought into the political narrative that “stock market volatility = recession”. It’s political in the sense that “the economy can’t possibly be good with the current leadership”. Don’t waste your breath arguing with it because it’s politics, not facts or rationality.
Are there really that many locations? I've seen a lot of malls, I've literally never seen a WeWork in person.
So, they sign a 15-year lease but are only on the hook for the first year? How does that work? Sounds more like a year lease with an option to extend?
So basically if the location turns out to be unprofitable, the subsidiary goes out of business or goes bankrupt and WeWork isn't stuck with the lease.
From the landlord's perspective, yes it is basically equivalent to a year lease with option to extend... not totally clear why the landlord would agree to that.
In this specific case a large sophisticated organization may be exploiting an unsophisticated organization, but really this is standard operating procedure for any franchise.
You can never involuntarily inherit debt in the US. You have to be a co-signer to begin with.
There is nothing preventing you from doing this as an individual as well. The hard part isn’t the subsidiary or LLC, it’s getting the counter party to enter into an agreement with an entity containing no assets or long term viability.
I mean by that theory I could open up 100s of Restaurant and close each of them that is not performing?
Landlords are likely agreeing to this only because Wework would never be able to sign a lease with any owner if they defaulted on a location.
They aren't, so they are.
Your comment seems to imply that the landowner has no choice.
If the landlord could find a better tenant, WeWork would have zero chance to rent any of it.
Good luck trying to create a nice product with a federation of people with zero product experience. You'll be training them / fighting the same battles over and over. And just wait until they bring in their family members who have great ideas.
https://www.cbre.com/real-estate-services/directory/flexible...
Disclosure: I work for CBRE, but in a different line of business with no knowledge of Hana outside of what is explained by the above link.
WeWork doesn't give more power to the tenant. WeWork is going to be less flexible on terms for the tenants, because they're doing smaller, shorter-term deals. No space improvement, no reconfiguration, no nothing -- you want the space or not?
Each remodel comes out of a "tenant improvement budget" given by the landlord, but that has to be recouped in rent over the duration of the lease, so it's not really free money to the tenant.
Having offices that have already been remodeled to be nice enough, and just being able to lease a flexible number of desks could deliver huge savings - in time and cost to growing companies.
Wait, why? If you're a small-medium sized company that isn't in retail (or some other business where you, as a matter of course, service customers on premises) why would you divert a significant amount of money to renovations that match your brand?
If you need to meet with investors or potential employees and are that concerned about appearances then just do it offsite.
Often, when the old tenants leave, the space is beat-up and unpresentable. Relative to the aggregate cost of rent over a couple of years, spending $10-20K to buff it out, put some walls in for meeting rooms and offices, etc... isn't a problematic spend.
I guess I should get used to the fact that so much journalism is just advertising.
I don't think the shared office space concept is a bad one, but landlords/building management companies will fight it for a long time. I'd imagine it to be an easier time for the shared office space companies to buy a building rather than trying to release a leased space.
CBRE Launches New Coworking Brand, Hana: https://allwork.space/2018/11/cbre-launches-new-coworking-br...
(note: I've never used Hana though I walked through the one in Palo Alto just out of curiosity, and it simply looked like a random co working space).
There’s always competition between divisions at large companies.
Also these guys might not have gotten the memo yet, or they did get the memo and there was friction about someone using CBRE property to “compete” with a business unit that wasn’t public knowledge yet.
So imagine all of the things you have to do for a new lease. Multiply that by the numbers in a shared office space. People like doing the least amount possible. CBRE managed buildings prefer to have long term leases, so they only have to do this at the beginning of a lease, not constantly.
The only way I see this becoming an issue is if WeWork was being shifty about taking responsibility for damage and risk caused by their clients and if they were it wasn't so much "market disruption" as "we don't want to play by the rules but still want cake"
The $1M is escrow is standard and par for the course and a guarantee against credit risk. Many landlords actually require a letter of credit from banks so that if your company were to go bankrupt the money wouldn’t be subject to seizure by bankruptcy courts.
Source: Work at similar landlord.
edit: spelling
1. Jump on hot tech trend threatening to disrupt industry
2. pay way too much for customers
3. get lots of VC money and use VC money to pay way too much for more customers
4. grow gargantuan
5. transform into basically every other non-tech big player in the industry because zero marginal cost only works in few industries
Not saying that WeWork is doing that, but it's definitely a time-honored Silicon Valley approach. Just look at the recent faux pas from Robinhood with their "checking & savings" accounts that got them bitch slapped nearly instantaneously by regulators, forcing Robinhood to withdraw the announcement and update it to a "cash management" account with details to follow.
Same for companies like Amazon. Grow super fast and ignore tax laws regarding nexus so you don't pay sales tax. And run a massive loss for years on end until you can figure out how to subsidize your losses through another profitable venture which you hope to achieve. They did with their AWS/cloud business and that makes the company as a whole barely profitable. But subsidizing your massive retail business losses with your high cloud margins is supposedly illegal. Number of regulators anywhere to be found? Zero. And don't forget to have an advantage against all the third party sellers because you can undercut them since you also sell millions of products and don't face the platform/marketplace fees, equating to illegal competition. Must be nice to be a big player.
Amazon has to make those investments to continue the rocket ship growth that justifies the share price.
Once the growth stops, boom.
Need to point out that Amazon did not ignore tax laws regarding nexus. They took advantage of a Supreme Court decision on nexus laws (Quill) that resulted in them not having nexus in most states. They were forced to change their stance because at some point it was clear that they had surpassed the Quill factors that had earlier protected them.
Moreover, you have the order of subsidies wrong. Amazon subsidized AWS with its retail earnings. The reason Amazon didn't show profits for years was because it reinvested its gross sales income in building up AWS and other ventures.
But the other stuff about third party sellers, etc. is spot on.
They also bought a huge warehouse footprint, too.
You may be right about Quill. I don't know enough about it. But regardless, at some point it's clear they surpassed the guidelines of Quill and became liable and are to this day not complying with the law in my opinion.
1. Borrow short.
2. Lend long.
It works until it doesn't.
Normally, though, the people who do this are banks, so we regulate with capital requirements and protect smallholders with deposit insurance.
When the people doing it are a massively leveraged real estate investment pool, masquerading as a disruptive tech startup, it's a lot less clear what happens when the music stops...
(For those not intimate with the finance side: WeWork is making super-long-term commitments of big dollars, and then microchunking them into super-short-term commitments. This is like a bank making long-term big loans by aggregating short-term demand deposits. In both cases, as long as there's a ton of short-term players to work with, you're safe. When there's a "run on the bank" the short-timers all leave quickly, but the institution's long-term obligations can't be unwound, leading to insolvency.)
"WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk."
So basically the institution's multiple long-term obligations can be handled by killing the leases that are the least profitable right?
WeWork as a company is also becoming increasingly unfocused. They’re getting into everything from schools, daycare and all sorts of other stuff. That’s never a good sign. Do one thing and do it really well profitably. Anyone can do a lot of cool stuff while burning investor cash like crazy.
Amazon seems like a counter point to your focus point too.
To me, WeWork sounds more like a Moviepass type situation.
Companies like Amazon and Google have more money than $deity and can afford to blow a few billion on non-core-business moonshots like self-driving cars and molten salt energy storage and space rockets.
WeWork does not have more money than $deity, so spinning out into less-related business is a sign of CoreBusinessNotQuiteCuttingTheMustardAnymore-itis.
In order to get more funding rounds and ever-higher valuations, they're promising pie-in-the-sky visions of WeWork daycare and schools, or Uber-powered autonomous truck fleets. And when the water goes out of that tide, they quietly announce very 20th century-sounding initiatives like property brokering and sharing zip scooters and offering food delivery.