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Comment by TAForObvReasons | Hacker News Reader

For a contrasting view, consider this tweet from @patio11 https://twitter.com/patio11/status/1161796809741627392

> In 2025, every Fortune 500 company will have 10k+ remote workers, and every purchasing department will approve a reimbursement for WeWork with no questions asked.

The actual bull case for WeWork is similar to Uber: there may be a massive trend, and WeWork is positioning itself to be the winner. With Uber it's the push to self-driving cars, and with WeWork it's the corporate move away from massive campuses and office buildings. In this new landscape, WeWork has extremely strong branding, experience, and a valuation that suggests it is the biggest player in the space.

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In 2025, every Fortune 500 company will have 10k+ remote workers

But what does that mean, exactly? I mean, imagine I'm an employee of BigBank in BigCity. My options are work from their office in the centre of town, work from my house wearing my pyjamas or... get dressed for work and commute into the centre of town, and sit in a WeWork instead and then charge it back on expenses because... reasons? I have better coffee and better wifi at my house...

> I mean, imagine I'm an employee of BigBank in BigCity.

Companies like BigBank will have offices in dozens of cities around the world with frequently shifting office needs. A WeWork type company can definitely fill a role for them. But that niche is already filled and it's a tough business. At this point WeWork is renting out space for less than they paid for it. Obviously that's good for market share but not a good sign for long term viability.

Imagine you are an employee of MidSizedBank in MidSizedCity but happen to live and work in BigCity because your company has enough business with BigCity companies that it makes sense to have a local presence for face to face meetings. MidSizedBank isn't quite sure how much business they will actually be doing out of BigCity over the next five years and do not want to commit to a space just yet but currently have six people in BigCity and have teams day-tripping in for 2-3 days every couple of weeks. WeWork provides the space and general office infrastructure and MidSizedBank has flexibility for this remote team.

The WeWork I am at in London is filled with companies like this. Docker's UK team, PagerDuty's EU branch, more small quant teams than you can shake a stick at, etc.

You may have better coffee and wifi at your house, but the rest of your team is not interested in crashing in your kitchen all day...

If WW can do this, so can any competitor - large and small.

UK retail is about to implode, so there's going to be plenty of competition in the co-working space as landlords and local business associations agree that reduced rent from light office occupancy is better than no rent from shops.

That may not quite serve the MidSizeMarket - but just as easily, larger competitors with stronger branding and sales efforts could move in. Especially after a downturn.

So WW is horribly exposed. It has no real first-mover advantage, no long-term loyalty from customers, and serious financial issues.

But what differentiates them from any other company that rents out commercial real estate and re-leases it on a shorter term?

I can totally believe that their line of business will grow by a huge factor, but I don't believe that they will ever earn the out-sized margins to justify their current valuation. Their business can be replicated by anyone with a bit of capital to spend on leasing office space. They don't actually own most of their office space; they just lease it.

Nothing specific differentiates them other than scope. I can bounce among a hot desk at a variety of locations around the city, do the same in cities across the EU/US, and my company only needs one service provider account to manage. And we can do so with a generous subsidy from US VCs...

> I can bounce among a hot desk at a variety of locations around the city, do the same in cities across the EU/US ...

what about a consistent user experience? that might differentiate We from competitors: ease of use and familiarity of environment for the workers. I mean, I go into a Starbucks or a Target store and it looks familiar and I already know what I'm gonna get (another Starbucks).

You don't go to the center of town, you go substantially less far to the local WeWork office, because it makes sense that WeWork in your neighborhood, rather than your company.

As someone who's worked from home for ~3 years now (and with much better coffee and Internet), it's isolating, and I basically don't stand up from my home office for ~16 hours some days, since it's also where I happen to spend at least some of my free time.

Screw "third place", I don't even have a "second place". I live in Bentonville, AR and I cannot wait for the WeWork that was announced here to get built.

But I can't see them actually putting offices at neighborhoods. I've looked at Warsaw and London and the locations are rather central.

What they have currently != what they'll have in the future.

Have they said this anywhere?

Not directly, but I kind of assumed every business wanted to be the "third place" these days, so I extrapolated that to mean that WeWork wants to replace your "second place" with their offices, provide value by saving your commute, and then consume your "third place" entirely as well.

A ton of articles articles talk sideways at this idea, here are a couple (the second link is the most direct "answer" to your question but it's all interesting):

https://www.citylab.com/equity/2019/03/wework-smart-cities-m...

https://www.curbed.com/2019/4/29/18523156/weworks-economic-i...

I'm not trying to assert "this is the truth", sorry if that's how I seemed. It's just my layman's take on the situation.

You might not have the option to work from your office. My workplace is oversubscribing a new location in downtown $Big_City with the simultaneous requirements that all seats in the downtown office be filled each day (to get the tax breaks $Big_City offers) AND that, since there are not enough seats, everyone will have to work from home on some kind of rotation.

And, have you worked from home on any kind of permanent basis? I don't have a family but I still like to get out sometimes. If you have no room for a dedicated office, or if you have pets/family that can be a distraction from work, a collab space is desired.

If a company is controlling costs by forcing people to work-from-home instead of paying for office space, it's not going to reimburse the people who it is forcing to work from home for a collab space plus a profit margin for the operator of the collab space.

As for individuals on their own, sure, if you are permanently working from home, a collab space is great if you don't have a dedicated office—but if WFH is a permanent arrangement, why wouldn't you rent space that includes a dedicated office instead of renting the two things separately with a commute between them plus probably paying a premium for shared office space since it will probably be in a more central, and expensive, location.

I mean, assuming We’s business plan isn't to continue to rent space at a loss forever, but to eventually make a profit.

Imagine you work for BigCo in BigCity but live in SmallCity a one hour drive from BigCity. Now you options are spend two hours in your car each day, work from home, or walk 10 minutes to the local WeWork space where you have a desk. Now Imagine that there are also 7 other people at BigCo that live in SmallCity, now you guys can get a shared office space together and still be all be 10 minutes walk from the office.

In fact the company I used to work for did just that. They rented 10 desks at a local co-working space in the next town over and told everybody who lived around there that they where free to work there if they didn't feel like making the 1 hour commute each way.

All that may be true--but any F500 will (or already has) strike a heavily discounted deal with WeWork. And WeWork already has small gross margins. And WeWork is still shouldering the risk of matching heavy long terms obligations with short term revenues. And F500 companies have already been doing exactly that for decades with Regus.

If I believed patio11’s 2025 projection, I'd also think by 2030 every Fortune 500 would be looking to optimize their remote-working costs by identifying their steady baseline needs in each major metro, acquiring leases to meet that dedicated capacity, and only allowing individual reimbursements for workers they don't have dedicated space available for (possibly on a day-to-day basis.)

But, I’m not convinced that his 2025—6 years from now—vision is even approximately correct.

This line of reasoning makes sense to me. Anecdata: most of the top tier banks I've worked with or at now have 3-4 people per desk, with more and more people working almost 100% remotely. When I started working with banks about eight years ago, I was usually laughed out the room when suggesting we should allow remote working. I became a kind of pilot case for 100% remote working about four years ago, and nowadays people in the same teams can go months without meeting in person because if they aren't remote all the time they come in to the office on different days.

I'm afraid he is correct, BigCorps are the main tenants as far as I can see. Which is sad, because WeWork is as fake and psychopathic as its CEO.

But Big Corps can do math; whether they will be the main tenants if WeWork ever stops dumping to gain business is less clear. Big Corps have been working with the whole space of available real estate options to optimize costs longer than WeWork has existed; I don't see where WeWork had any stickiness.

BigCorps have „Innovation Labs“, where things are „cooler“ than in main corporate because bean bags. Value proposition is attracting employees that wouldn’t consider joining otherwise. This is them outsourcing this to WeWork, and I can see how they don’t want to be involved in running such an operation. Remember that BigCorp is not price sensitive.

> Remember that BigCorp is not price sensitive.

BigCorps are very price sensitive in the sense of minimizing cost per value and aggressively leveraging their size to do that.

They aren't price sensitive in the sense that if something has a value proposition that justifies the cost (even if it's not a short payoff, and even if it's a large absolute price) they have an easy time finding money.

They may also sometimes seem but to be price sensitive in the first sense because they tend to have lots of small fiefdoms where exceptions to aggressive optimization can survive as long as their shake is not too big and/or the right authorities have bought in, but that's an exception to the general rule and isn't going to cover a massive aren't of remote workers at each BigCorp.

Real Estate is also a much bigger business than taxi cabs.

The big bet on them I suspect is that any upcoming recession will probably lead to a lot of companies wanting to reduce their office costs. They may want to switch to WeWork managing their office spaces much like tech companies want to switch to Amazon Microsoft or IBM managing their IT infrastructure.

Have you seen WeWork’s prices? It’s much more expensive to host a team in WeWork than just about anywhere else (including in your own corporate headquarters). I can understand companies wanting to variabilize office costs, but the first thing they’ll do is launch an RfQ... and WeWork’s fancy offices and free beer are not going to be much help there.

There is little network effects for office space vs taxi availability.

Second, Regus is larger (more revenue, more locations iirc). Regus is profitable.

That's just a direct coworking/office space globally company. WeWork isn't even a leader. It's just shiny bullshit.

The bull case is that there is a vaguely WeWork-shaped market opportunity, and WeWork exists. The bear case focuses on the flaws in WeWork itself. Is WeWork going to sort themselves out before someone else overcomes their market incumbency?

That's a really compelling argument for why WeWork will be a successful office space rental company. That would mean WeWork somehow loses 90% of its value and is still successful...

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