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This has all happened before. The proto-WeWork was called HQGlobal and the firm behind it was Frontline Capital. The whole thing unraveled in the 2000 bust as t

This has all happened before. The proto-WeWork was called HQGlobal and the firm behind it was Frontline Capital. The whole thing unraveled in the 2000 bust as the tenants all went out of business and canceled their leases at the same time. WeWork is not going to be pretty when the economy turns. Bill Ackman backed Frontline Capital and it pretty much sunk his first hedge fund, Gotham Capital.

crb002 7y ago
It can work, but they need more anchors. Stripe, Gitlab, ... companies that are remote but have workers prefer to cowork. Economic downturn might actually help them if they can gobble long term low leases. More unemployed also means more consumer base outside big corporate America. Their biggest threat is small mom and pop coworking spaces like Gravitate in DSM. Geoff wouldn't sell for less than a massive premium, and nobody is going for WeWorks bad service if they tried to compete.
- cylinder 7y ago
  Why on earth would stripe pay a middle man like WeWork to manage their office and lease?! Stripe is looking at buying an entire building. I'm pretty sure they can handle a 15 yr lease just fine. And don't need WeWork staff to decide what their office kitchens need.
  - solidasparagus 7y ago
    I assume they mean using WeWork for Stripe's non-primary offices where flexibility is often more valuable.
    - manigandham 7y ago
      Stripe is at a size where they can easily afford all the flexibility they need without a middleman company.
      - bsder 7y ago
        Stripe would almost certainly prefer to outsource this for places where they have a small handful of employees, and dealing with one company has a big opportunity cost buried in it that they almost certainly would be willing to pay.
        manigandham 7y ago
        If that was true then they would be, but they aren't. Companies that big can easily afford one or many full-time employees focused on office and resource management which is more than enough to figure out a few leases. Remember this is a company that already has a major international business in one of the most regulation industries. Adding in a few real-estate deals is unlikely to be a major source of friction.
        bsder 7y ago
        > If that was true then they would be, but they aren't. This article (https://www.curbed.com/2019/3/26/18280774/wework-real-estate-office-space-coworking https://www.curbed.com/2019/3/26/18280774/wework-real-estate...) seems to indicate that big corporate clients are quite happy to do exactly what I described. I suspect this probably also has to do with transferring CapEx to OpEx. Perhaps Stripe, specifically, thinks they have a better bead on this than employing someone like WeWork.
      - jtonz 7y ago
        Isn't that We's end goal though? To get billion dollar companies like Microsoft, Stripe, etc. as tenants. People that don't really want to deal with running an entire building when they can just pay someone else to do it.
        abakker 7y ago
        That is already available. Ever heard of Cushman and Wakefield?
        7y ago
  - andrewingram 7y ago
    Facebook leases an entire WeWork building in London, but I imagine it's not their long-term plan.
    - paulddraper 7y ago
      No one is leasing WeWork as the long-term plan. That's kinda the point of WeWork: flexibility.
  - wp381640 7y ago
    Because demand might be elastic and you can keep costs closer to utilization and outsource stuff you don't want to do like manage an office Same reason companies pay Google and Amazon for cloud servers
    - delfinom 7y ago
      But plenty of "non-WeWork" office space offerings have already been like that for decades. They'll provide janitors, receptionists, etc unless you opt for spaces without it to run your own.
      - dagw 7y ago
        But plenty of "non-WeWork" office space offerings have already been like that for decades. Cynically, those companies have the downside of needing to make a profit. WeWork strikes me as the sort of company that would happily take a massive loss, just to get to brag that Stripe and Facebook use their services.
        DavidHm 7y ago
        That's 100% been the case - I am familiar with the industry and they have been more than willing to not make any margin in order to get the clients they want (big names, or poach from the competition) That strategy works great, so long as you have unlimited funding.
  - colinloretz 7y ago
    WeWork has a "Powered by We" service that companies like Amazon use so they don't have to manage a new building. They allow WeWork to deal with everything from top to bottom. https://www.poweredbywe.com/ https://www.poweredbywe.com/
  - goatinaboat 7y ago
    Companies like to brand offices as their own. Their name on the front, their corporate colours in the decor. WeWork offers the exact opposite of that. No company with its own strong brand will want to subsume that brand to that of their letting agent.
    - dagw 7y ago
      WeWork offers the exact opposite of that. WeWork offers both services. WeWork will just as happily get you a whole building designed and decorated to your exact specs, as they will provide you with 3 desks paid for by the day.
- duxup 7y ago
  Do Gitlab and such companies even have the volume of employees to show up on WeWork's balance sheet? How many of those places have people working at co-working spaces anyway? As opposed to home? Not sure that during a downturn companies, or even individuals will be more likely to go for paying for fancy coworking space... perhaps less so? My understanding is WeWork is more likely to be MORE sensitive to an economic downturn compared to their competitors as their valuation will put more pressure on them to make money and arguably they might already be behind the bullet on that one.
- naravara 7y ago
  If you want to be durable in a downturn you need resilient or countercyclical industries leasing from you. If they had a bunch of boring utility companies and collections agencies leasing from them then we might be onto something.
- deleted 7y ago
  [deleted]
- andrewfong 7y ago
  The anchors might lease, but it's essentially just them mitigating their risk at the expense of WeWork though, right? If Facebook leases an entire building via WeWork rather than doing it themselves (and they definitely have the capacity to do it themselves), it's because they've decided there's a good chance they'll vacate the space in a short period of time and they'd rather sign a short term contract with WeWork than deal with a 15 year lease. That's not great for WeWork though.
MuffinFlavored 7y ago
> when the economy turns What if the economy never turns?

crb002 7y ago

It can work, but they need more anchors. Stripe, Gitlab, ... companies that are remote but have workers prefer to cowork. Economic downturn might actually help them if they can gobble long term low leases. More unemployed also means more consumer base outside big corporate America. Their biggest threat is small mom and pop coworking spaces like Gravitate in DSM. Geoff wouldn't sell for less than a massive premium, and nobody is going for WeWorks bad service if they tried to compete.

cylinder 7y ago
Why on earth would stripe pay a middle man like WeWork to manage their office and lease?! Stripe is looking at buying an entire building. I'm pretty sure they can handle a 15 yr lease just fine. And don't need WeWork staff to decide what their office kitchens need.
- solidasparagus 7y ago
  I assume they mean using WeWork for Stripe's non-primary offices where flexibility is often more valuable.
  - manigandham 7y ago
    Stripe is at a size where they can easily afford all the flexibility they need without a middleman company.
    - bsder 7y ago
      Stripe would almost certainly prefer to outsource this for places where they have a small handful of employees, and dealing with one company has a big opportunity cost buried in it that they almost certainly would be willing to pay.
      - manigandham 7y ago
        If that was true then they would be, but they aren't. Companies that big can easily afford one or many full-time employees focused on office and resource management which is more than enough to figure out a few leases. Remember this is a company that already has a major international business in one of the most regulation industries. Adding in a few real-estate deals is unlikely to be a major source of friction.
        bsder 7y ago
        > If that was true then they would be, but they aren't. This article (https://www.curbed.com/2019/3/26/18280774/wework-real-estate-office-space-coworking https://www.curbed.com/2019/3/26/18280774/wework-real-estate...) seems to indicate that big corporate clients are quite happy to do exactly what I described. I suspect this probably also has to do with transferring CapEx to OpEx. Perhaps Stripe, specifically, thinks they have a better bead on this than employing someone like WeWork.
    - jtonz 7y ago
      Isn't that We's end goal though? To get billion dollar companies like Microsoft, Stripe, etc. as tenants. People that don't really want to deal with running an entire building when they can just pay someone else to do it.
      - abakker 7y ago
        That is already available. Ever heard of Cushman and Wakefield?
        7y ago
- andrewingram 7y ago
  Facebook leases an entire WeWork building in London, but I imagine it's not their long-term plan.
  - paulddraper 7y ago
    No one is leasing WeWork as the long-term plan. That's kinda the point of WeWork: flexibility.
- wp381640 7y ago
  Because demand might be elastic and you can keep costs closer to utilization and outsource stuff you don't want to do like manage an office Same reason companies pay Google and Amazon for cloud servers
  - delfinom 7y ago
    But plenty of "non-WeWork" office space offerings have already been like that for decades. They'll provide janitors, receptionists, etc unless you opt for spaces without it to run your own.
    - dagw 7y ago
      But plenty of "non-WeWork" office space offerings have already been like that for decades. Cynically, those companies have the downside of needing to make a profit. WeWork strikes me as the sort of company that would happily take a massive loss, just to get to brag that Stripe and Facebook use their services.
      - DavidHm 7y ago
        That's 100% been the case - I am familiar with the industry and they have been more than willing to not make any margin in order to get the clients they want (big names, or poach from the competition) That strategy works great, so long as you have unlimited funding.
- colinloretz 7y ago
  WeWork has a "Powered by We" service that companies like Amazon use so they don't have to manage a new building. They allow WeWork to deal with everything from top to bottom. https://www.poweredbywe.com/ https://www.poweredbywe.com/
- goatinaboat 7y ago
  Companies like to brand offices as their own. Their name on the front, their corporate colours in the decor. WeWork offers the exact opposite of that. No company with its own strong brand will want to subsume that brand to that of their letting agent.
  - dagw 7y ago
    WeWork offers the exact opposite of that. WeWork offers both services. WeWork will just as happily get you a whole building designed and decorated to your exact specs, as they will provide you with 3 desks paid for by the day.
duxup 7y ago
Do Gitlab and such companies even have the volume of employees to show up on WeWork's balance sheet? How many of those places have people working at co-working spaces anyway? As opposed to home? Not sure that during a downturn companies, or even individuals will be more likely to go for paying for fancy coworking space... perhaps less so? My understanding is WeWork is more likely to be MORE sensitive to an economic downturn compared to their competitors as their valuation will put more pressure on them to make money and arguably they might already be behind the bullet on that one.
naravara 7y ago
If you want to be durable in a downturn you need resilient or countercyclical industries leasing from you. If they had a bunch of boring utility companies and collections agencies leasing from them then we might be onto something.
deleted 7y ago
[deleted]
andrewfong 7y ago
The anchors might lease, but it's essentially just them mitigating their risk at the expense of WeWork though, right? If Facebook leases an entire building via WeWork rather than doing it themselves (and they definitely have the capacity to do it themselves), it's because they've decided there's a good chance they'll vacate the space in a short period of time and they'd rather sign a short term contract with WeWork than deal with a 15 year lease. That's not great for WeWork though.

MuffinFlavored 7y ago

> when the economy turns What if the economy never turns?