Anybody remember the dot.com boom?
Jamie Vine
Over 27 Years Experience in the Flexible Workspace Sector | Making Work a Happy Place since 2010
I have been fairly outspoken about the sustainability of WeWork. It seems I am not alone.
So here's the thing; everyone invested in the dot.com boom because they didn't want to miss out on an opportunity they didn't understand. People were investing in the market access that the internet could provide without paying too much attention to the business fundamentals of the online platform or the people they were investing in.
The accelerating generational shift in which Millennials and Generation Z will become the vast majority of the decision makers/workforce is underway and there are many theories and much research about how this will affect the way we do business, but in reality nobody knows.
WeWork has been selling the solution to getting Millennials and Gen Z to engage in the workforce/workplace and investors have been lapping it up without really understanding the problem WeWork are solving (or asking if there is one) and without paying any attention to the business fundamentals. Sound familiar?
WeWork is nothing new. It is serviced offices (without the service) and the serviced office business model principles still apply. They are blaming growth for their cash burn, but I am yet to see a report that shows how the operating business is performing once the growth spend is removed. They do not show any breakdown in member take-up by category (i.e. full-time/part-time/social memberships), so their occupancy claims are more than questionable.
They are living in hope that one day they will generate more income than their vast fixed costs.
To real estate agents they are a fee (generally a big fee), and as such they are being promoted by agents to landlords without the agents having any concern for where WeWork's members are going to come from or whether or not their business model is flawed.
To landlords, they are a large tenant with deep pockets that can make the WALE look great and improve their asset value overnight, but what happens if there is a hole in their pocket? and that hole is getting bigger by the day?.
(by the way the dot.com boom imploded overnight)
Partner at Vail Williams: South East markets
6 年This echos our clients feedback of the Wework model. One clients feedback on a tour remarked that they gave the impression of 'style over substance' - their words. At RARE:find we spend our days purely searching for office space, whether its serviced space, managed offices or conventional self searched space and have noticed a trend whereby companies are utilising serviced space increasingly to 'move in' project teams or non-core business departments so as to realise space at their existing office. Not all of these teams want to be in a high octane small start up environment that rework brands itself. Its noticeable that the service sector is evolving fast and whilst the same type of service is on offer across the board different styles are emerging to suit different work styles and cultures - Pro-working (professionals), Boutique (FinTech/ marketing), Hipster (Tech Co). Some companies will start in one style of office and move through the stages of their growth into other styles of space. One size doesn't fit all. Enjoying adapting to change!
Connect, Provoke, Promote & Entertain
6 年‘Serviced offices without the service’?? Isn’t that what we had before? Even if WeWork were to suddenly fail (which I doubt) then it has already done a huge amount to force necessary change in service levels and choice.
Office, Workplace and Life Sciences Development Leasing Advisor
6 年Interesting piece raising concerns many of us active in the market subscribe to. So many parallels with early 2000s - and then again following the GFC. They are undoubted disrupters to the sector, but there also plenty of other new (and existing) players who offer, in my view, as good if not better proposition built off a more sustainable growth model. No one wants them to fail - we really don’t need a massive office dump in what will be challenging times ahead.
Sterling Real Estate - Founding Partner
6 年100% agree. WW are expanding to gain market share in same way as FB or Amazon. However the underlying costs and revenues simply do not add up on the “stabilised” assets. Several serviced office operators have failed for this basic reason, and just because you are cool and big does not insulate you from this issue.