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I worked in this industry briefly - I'm pretty sure a wework successor or several will come out of it very successful, without the baggage that Adam Neumann bro

I worked in this industry briefly - I'm pretty sure a wework successor or several will come out of it very successful, without the baggage that Adam Neumann brought, because the model is smart. The basic model is to take distressed real estate, chop it up, sublease it and use some of the money to set up a mid high end space with plug and play offices, community events and a doorman. It works, but it is not easy to execute properly.

blueblisters 6y ago
Can you run this model without charging higher-than-market-rate leases and without relying on early stage startups that come with huge churn?
- ameister14 6y ago
  I'm not an expert but I think the 'higher than market rate' part is tough because you're offering services. In non-commercial terms, it's a nicely appointed doorman building with utilities included and an indoor gym vs a no frills apartment. So you can expect to pay more - the question is how much more. For the wework tenant, the cost/benefit should include the price of outfitting an office as well as internet and the benefits the perks provide for employee satisfaction, recruitment and retention. So if you can put a value on that and push it over the time period of the lease, you can do the math on how much more you'd be willing to pay. For the company running the offices, a lot depends on what deals you can cut with building ownership - for example, a lot of buildings will give you 6-12 months or more free while you remodel, so if you get that done quickly you end up with 3-6 months free; you can use that over the life of the lease to increase margins or have space where you can offer rebates to your customers as well; though that depends on how quickly you can fill the offices. This was one of the things that I think is killing wework - they started signing deals with buildings without negotiating hard and they gave too much stuff away in contracts with their own customers.

blueblisters 6y ago

Can you run this model without charging higher-than-market-rate leases and without relying on early stage startups that come with huge churn?

ameister14 6y ago
I'm not an expert but I think the 'higher than market rate' part is tough because you're offering services. In non-commercial terms, it's a nicely appointed doorman building with utilities included and an indoor gym vs a no frills apartment. So you can expect to pay more - the question is how much more. For the wework tenant, the cost/benefit should include the price of outfitting an office as well as internet and the benefits the perks provide for employee satisfaction, recruitment and retention. So if you can put a value on that and push it over the time period of the lease, you can do the math on how much more you'd be willing to pay. For the company running the offices, a lot depends on what deals you can cut with building ownership - for example, a lot of buildings will give you 6-12 months or more free while you remodel, so if you get that done quickly you end up with 3-6 months free; you can use that over the life of the lease to increase margins or have space where you can offer rebates to your customers as well; though that depends on how quickly you can fill the offices. This was one of the things that I think is killing wework - they started signing deals with buildings without negotiating hard and they gave too much stuff away in contracts with their own customers.