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Critics say WeWork is an overvalued real-estate play

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Re: Critics say WeWork is an overvalued real-estate play

#71

Post by neaden »

sillysaurus3 wrote: post #66
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

Speaking for myself I'm not negative about the core idea. I just think sometimes someone comes out with a good idea and investors act like it is the greatest deal of all time!!!!

Re: Critics say WeWork is an overvalued real-estate play

#72

Post by geoffw8 »

TYPE_FASTER wrote: post #70
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

This business model has existed before WeWork, and I've used it. Here's an example: https://www.regus.com Similar idea: free coffee, shared printer, power/internet access/etc. It made sense for two people in one room. When it got to three or four in a bigger space, it made more sense to lease a dedicated two room office and setup our own internet connection, etc.

True - but my god the experiences aren't even in the same league and for me that matters. WeWork is worlds apart.

Re: Critics say WeWork is an overvalued real-estate play

#73

Post by sillysaurus3 »

rezistik wrote: post #69
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

It's not free beer and free coffee, it's X% of $2,200 a month beer and Y% of $2,200 a month coffee.

Sure, but your corporate overlord^W^Wfounder pays for that. From your POV, it's all you can drink coffee.

Also $2200 is on the high end for four people. You can probably talk them down to $2k or less.

You'd be surprised how valuable it is to have a pot of coffee ready to go all the time, next to a mini fridge that's always stocked with half and half. Sweetner's on the counter. It ends up taking like 30 seconds to grab coffee.

The janitors are surprisingly cool people, and they're fastidious about making sure the trash is taken out, doing the dishes (yes, you get a kitchen + fridge!), and making sure everything is stocked.

It's so effective to pool resources like that. Everyone gets those benefits just by being in the same place. And it's remarkable how un-cramped it all feels. Your office even has beautiful floor to ceiling windows that gives you a nice view of downtown and sunsets.

Re: Critics say WeWork is an overvalued real-estate play

#74

Post by cratermoon »

sillysaurus3 wrote: post #66
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

It's a reasonable office services model -- every company would like to have (at least) fresh coffee, internet, print/copy services, meetings rooms, janitorial service, etc. All the unsexy things that make a workspace into a place to get stuff done. Depending on the size, the companies may do it themselves, or may contract with one of the many vendors for that.

With WeWork, though, the sweet spot is for companies that are in between the solo entrepreneur (or the 2-3 friends) and about say 20-25 people. There is a good value for the hot desk or reserved desk for individuals.

At least in the locations I'm familiar with, once the number of people in a company gets too big then costs per square foot soar above regular office real estate in the same area. We found that having a meeting for 3-4 people couldn't happen on a whim, you had to book a room and if none were available you had to delay the meeting. Also, our meetings could never run long because inevitably someone else had booked the room afterwards and needed us out.

A lot of small things that might matter for some sorts of companies never really gave us much value like printer and copier services. While there's no true paperless office, the amount of printed stuff we generated (not counting marketing materials, which went to a graphic print service anyway) was negligible.

Re: Critics say WeWork is an overvalued real-estate play

#75

Post by pcsanwald »

lnanek2 wrote: post #65
dmode wrote: post #38

Earlier quoted context omitted.

Honestly, as someone dealing with small businesses, selling insurance and HR services to tiny startups is not a $20B business. Selling those to large companies is, but that market is already saturated.

The WeWork claim is that some of their startups will become huge and they'll already have their foot in the door, so to speak, for selling those huge companies more real estate and services. Having a 5 person startup as a renter is not a big win, but if that startup becomes Twitter size...

Do they seriously claim this? It sounds like a pretty far-fetched thing for them to say. I've opened several offices and moved my company around a fair bit, and I don't know how WeWork or anyone else would have their "foot in the door".

Any company approaching the size of twitter is going to contract those services out and either beat them down to very thin margins or manage the services themselves. very little upside in that.

Re: Critics say WeWork is an overvalued real-estate play

#76

Post by lloyd-christmas »

mrisoli wrote: post #45
nugget wrote: post #15

Earlier quoted context omitted.

I went to WeWork just because I needed a few month-to-month desks quickly. WeWork has excellent execution but I don't think of them as a lifestyle or luxury brand. If someone else can provide me the same ballpark product for 20% less then I would likely switch. There's a lot of room for competitors to move into the market.

You might not think of them as a lifestyle brand but it certainly looks like that is the case they are making. I only knew WeWork by name and didn't know much about it, after this thread, I googled a bit and their Twitter page is full of meme-level motivational images(Always be hustlin' signs, dogs at work), they are definitely trying to appeal to a specific audience here. I share the sentiment of others in this thre…

> I wouldn't be surprised if their next bet is the next 'W hotels'

They already are doing that targeting the very small business audience:

https://www.welive.com/

Re: Critics say WeWork is an overvalued real-estate play

#77

Post by tytytytytytytyt »

sillysaurus3 wrote: post #66
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

All of those things are either what you'd expect when you rent a normal office space or aren't the amazing extra perk you make them out to be. The meeting rooms you had to pay to use. The coffee and beer are included in the total price and aren't really that valuable anyway. And the beer and toilet paper frequently ran out. And the phone booths didn't even have doors, they had curtains.

It was nice, especially since I was an employee, not the company renting the space, but the only real benefit was there would be occasional free meals and not having to leave the building to go to the occasional meetup.com style meetup that happened there.

I'm guessing the price per square foot isn't that amazing compared to what you could get at other places, though.

Re: Critics say WeWork is an overvalued real-estate play

#78

Post by pcsanwald »

incomplete wrote: post #39
eddieplan9 wrote: post #10

Earlier quoted context omitted.

Comparing WeWork to traditional office landlord is like comparing Starbucks to Dunkin' Donut. Please don't go to Starbucks because its coffee is better or cheaper (it's neither), but as a lifestyle choice. Similarly, people don't go to WeWork because they need a desk.

actually, i beg to differ. my wife has a 90% remote job and has a desk @ wework in berkeley. i've met a ton of her weworkmates and while a large percentage are entrepreneurs, many are remote workers or self-employed. even the small amount of infrastructure that wework provides to it's members is incredibly useful: wifi that always works, coffee, lounge area, meeting/phone rooms and generally a quiet place to focus an…

I agree. I wonder if most people in this thread saying that renting your own space is cheaper has ever really done this. I have, a bunch, and keeping the lights on is not free in terms of time/money. At a small company, this means either you hire someone to handle all this stuff, or make the employees do it. Either way, running an office yourself ends up being expensive.

Re: Critics say WeWork is an overvalued real-estate play

#79

Post by tptacek »

sillysaurus3 wrote: post #66
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

In a lot of markets, WeWork is a great deal. We just moved from Chicago West Loop WeWork to our first real office; we got what I think is a pretty amazing deal on our new office and it is still very difficult to beat the package WeWork puts together.

But that's not the critique being leveled at WeWork here; the critique is, WeWork can't in the long run be profitable at these rates. In a lot of their spaces --- maybe all of them? --- they're overstaffed. They're premium-everything (I wanted the couches from the first floor at WeWork West Loop and asked where they got them; they were custom-designed!). Free beer on every floor (this turns out not to be a win, but it's still part of their cost basis). Most importantly: they site these things in marquee locations that they have to be paying a mint to lease.

I'm happy to take full advantage of the largesse of Investor Storytime Economics, but unless you're Amazon, the music has to stop playing at some point. WeWork is not Amazon.

Re: Critics say WeWork is an overvalued real-estate play

#80

Post by [deleted] »

cratermoon wrote: post #74
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

It's a reasonable office services model -- every company would like to have (at least) fresh coffee, internet, print/copy services, meetings rooms, janitorial service, etc. All the unsexy things that make a workspace into a place to get stuff done. Depending on the size, the companies may do it themselves, or may contract with one of the many vendors for that. With WeWork, though, the sweet spot is for companies that…

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