WeBroke WeWork, WePromise WeFix it: How subleasing giant hopes to survive bankruptcy WeWork, once valued at $47 billion, filed for bankruptcy on Monday, even as its recently appointed CEO David Tolley reassured tenants the business is "here to stay." The world-spanning office subleasing outfit applied for protection under Chapter 11 of the US Bankruptcy Code and plans to take similar action in Canada. …
"One time I was looking for private office for some medium term project and the prices I got...
Well, it was cheaper to rent a house and "work from home"."
I was supposed to work for a company developing a very interesting generator (still under NDA) The inventor lived in Silicon Valley where the cost of office space is stupid money. The team would have been doing some planning together and then all running off to our own corners to fill in the bits of the hardware design we were hired to come up with. The company did lease a good size home on the edge of the area where we would all stay for a week or so living and working for those periods. We would then go and do work from home as we all had suitable home offices and workspace. The big mechanical stuff was outsourced for the most part and there was a large shop contracted to lease some space to the company that was out of the area and massively less expensive. We would all spend some time there when everything was ready for final assembly and test. The goal was to produce some examples of the patented unit to be able to show real data and sell the whole package off rather than to grow a company to manufacture products. I thought it a wizard move to rent a large house that would work for living and working. We were all within a few hundred miles and the reason to locate anywhere near Silicon Valley was to accommodate the inventor who didn't want to travel or move house. The whole thing fell apart when the business team wasted loads of time and money playing silly tax avoidance games rather than getting on with getting something accomplished.
I've seen some of these shared workspaces that can be described more like 20-something fun centers with a veneer of businessy stuff.
One of my clients has an office in a shared environment and it works out great for them. They have amenities such as meeting rooms that they can book as needed, but don't have to pay for full time as they would if they were in their own offices. There's also a kitchen area with vending for fizzy drinks and snacks, a microwave, fridge, counter and a toaster oven. Maintenance for the building is provided so they don't have to have their own cleaners or contract with a firm to keep the place tidy.
I've seen advertisements for shared offices that also includes receptionist services, copying/printshop, package shipping/receiving and mail services. A couple of independent attorneys I've interviewed have this sort of space but do a lot of their work at home. Being blood-sucking attorneys, they don't want to hand out their home address, but most of their work is research, writing and reviewing, they only need an office to meet with people and get away from home if there are too many distractions when they need to concentrate. All of the other office functions are there for them on demand.
The concept of wide open coffee shop-esque working environments with lots of diversions such as ping pong, privacy pods and slides isn't often conducive to getting work done. It's a fantastic way to hang out with people, but to get paid, one must accomplish work and those places aren't good for that. If they were, every big company would have those sorts offerings instead of long rows of tables barely adequate enough to plonk down a laptop with noise cancelling headphones on and slave away doing .... what is it that those rows of people are doing? If you don't need an office or at least a cubicle and just stare at a laptop all day, working from home is going to be much better.
Actually, most rentals were standard office. WeWork's claim was that it could achieve higher yields than the competition with the facilities stuff thrown in on top as high margin added value. However, the main problem with the approach was the classic mismatch of long-term property leases with short-term customer ones. Customers could and did decide it wasn't for them which left WeWork holding expensive office space that nobody wanted.
I wouldn't hold out much for them getting reduced leases. It's easy enough for landlords to prefer to take losses which can be offset against tax and hope for more solvent tenants next year, or apply to convert the building to residential accommodation as demand for this is still high.
I've worked with - and in premises provided by - a regional not-for-profit that's been providing "incubator" office units for decades. They're relatively immune to economic cycles as they mostly own space in secondary or tertiary locations for which grant funding was available to support either the purchase or refurbishment and operate with the minimum of staff and overheads.
There's obviously a bit more scope in central city locations where flexibility is a greater incentive given the much higher rents, but in order to make a reasonable margin and cover the cost of voids I can't see how you could actually make a paying business out of it without pricing the flexibility so high that it became a serious disincentive.
It turns out that, despite all Neumann's claims, you can't He spouted so much bullshit that it's difficult to know where to start but, yeah, he basically wanted to scale the "co-working" idea massively.
Back in 2018 lots of people were taken in as this article in The Economist makes clear. The numbers were always dubious as was the premise that companies would always choose to rent rather than own property. And then, of course, it became clear that working from home could save companies even more money.
But I'm sure none of the managers of our pension funds were taken in by the hype? What's that you say, boy? There were? Crumbs…
And some cities are already so oversupplied with commercial real estate that it's available for regular leasing at rock-bottom prices anyway. When I lived in Michigan not that long ago, Lansing was full of unused commercial space. And it's not like there isn't a talent pool in the area (a Research I university next door and several more in commuting distance) or amenities. Co-working is a hard sell in those places, since you can just get your own dedicated space cheaply.
"Co-working is a hard sell in those places, since you can just get your own dedicated space cheaply."
It's depends on the flavor of Co-Working space. Offices with shared amenities can be great for independent professionals (accountants, attorneys, financial planners, civil engineers) that need some office services, but not on a full time basis. It's not just rent, but the cost for HVAC, minimum utility charges, cleaning....
"They're relatively immune to economic cycles as they mostly own space in secondary or tertiary locations for which grant funding was available to support either the purchase or refurbishment and operate with the minimum of staff and overheads."
If you are a startup, being in those secondary and tertiary locations is a great way to save money. Everything will be cheaper for the business and the people involved. Living in a 18sqm closet because that's all you can afford in a major city downtown district is soul crushing. Trying to start a business in that sort of area is also a massive waste of funds just to be in an upscale post code. A WeWork sublease isn't going to be any better.
Not meeting statutory requirements seems almost to be a, ahem, statutory requirement in Blighty. Perfectly reasonable requirements are waved away as being onerous (emergency doors being locked is a regular occurrence as are highly flammable insulation materials) and hard on business. Instead of taking the opportunity to lead in the area, which Britain once did: Made in Germany was originally used to mark substandard products.
The problem with all these WeWork kind of shops is that their offices are not fit for purpose.
I mean unless you are a shop that needs bums on seats and can scare / manipulate / coerce people into commuting to your office place.
If you do anything else than having people stuck to their laptops or having endless beer soaked meetings, then you are out of luck finding suitable space.
There is very much nothing available for creatives, crafts, light manufacturing, the things many people are passionate about and would love to turn into business.
Their dreams are sentenced to die in a living room (if they are lucky to have access to one), when their house mates are tired of them, and they couldn't find anything else.
While I like the idea, I don't think what you're alluding to (purpose-built locales to rent/purchase) would work on a large corporate scale, and I bet you on the nonexistence of any business that specialize in it. Those that are in the creative or blue collar hardware businesses usually specialize in the equipment and installation, not the realestate. And realestate owners would surely not want to ruin their spaces for potential clients by shoving a bunch of industry-specific crap in it—or worse yet, have to refit the space for new clients after already putting the work in. The market is just too niche.
Now what does get some traction are maker spaces, where you can usually pay a membership and get access to those kinds of resources without the commitment to an entire rental space or property purchase.
Maybe you could find a small business development incubator that [allows one to have] customized the space to fit a specific role—but I doubt it.
"Now what does get some traction are maker spaces, where you can usually pay a membership and get access to those kinds of resources without the commitment to an entire rental space or property purchase"
I wish there were one of those places near me. I have a workshop with a bunch of tools, but I can't justify something like a laser cutter or a resin 3D printer that I'd only use every couple of months. I could afford a small resin printer, but it would eat up space and be a pain to take out and put away. I also don't have big machines so if I have a project over a certain size, I have to outsource even though I could do the work myself.
A building with small securable offices that provides many office staff functions and gives access to a moderately comprehensive workshop can be great for a small startup and people doing a variety of bespoke work. It would still be crazy to do that sort of thing in the downtown of a large city unless you could come in with some anchor clients that would be good for long term contracts. One person I used to do circuit board layouts for moved from SoCal to Raleigh/Durham and I got to know that area when I went out to visit him once. In California he could only afford to lease a very small workshop to build his products, but purchased a much larger light industrial building outright in NC. He made a pretty good killing when he sold his home in California so he had the money. It opened my eyes to understanding how much different costs are in different parts of the US. I considered moving to that area, but the cost to move wasn't in my budget and I would have also needed to train a whole new staff which would mean my main manufacturing business would be offline for a couple of months.
Agreed. Currently I don't even have room for basic shop tools like a drill press or lathe. I have real estate, but I'll have to put up more outbuildings even to properly house my existing DIY tools (to use my table saw I have to carry it outside the shed), and that's an expensive and time-consuming process in itself. It'd be great to have time-shared access to an array of tools and the space to use them.
"to use my table saw I have to carry it outside the shed"
Mine folds up and I roll it out on the driveway mainly due to having too much crap I need to get rid of in the garage. I'd still do my cutting outside to keep the dust down. It's vacant all the way around my house so sawdust isn't a problem. I don't yet have room for my lathe/mill set up. I'm about half done with insulating which requires moving loads of stuff out of the way to get to the walls. I still need to add drywall and buy more shelving to make the most of the space. I thought of adding a shed, but in my town I'd be worried about large two legged rats making midnight visits. The garage is well secured and alarmed and feet from my bedroom.
If you didn't read the risk disclosure, the other warning was Neumann's ownership of the word "We" and his decision to charge WeWork for the continued use of that word. On learning of this, experienced fundies concluded Neumann was plausibly a couple of desks short on the top floor, and passed.
Alfred E Neuman is one 'N' short of being more than just a metaphorical progenitor.
WeeWork might have been more accurate as in LittleWork, or given the beer, wine and tequila involved... PissWork.
I don't imagine the world has ever seen so much sillyness as it has in the last 30 years at least any not involving tulips or railroads.
The internet sadly allowed an explosion of outfits that objectively do fuck all in the marketspace they have polluted apart from act to replace the yellow pages. The difference being they wanted to screw a %age out of every transaction.
All very well. Until people twig that (a) they are adding zero value to the chain and (b) their whack is actually the taxes and charges other companies had to pay.
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