Live data from Hacker News

Critics say WeWork is an overvalued real-estate play

wsj.com

21–30 of 183 posts

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

#21
post #9

"Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion." This seems to me to be a pretty big warning sign that the company is overvalued.

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.

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN.

At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord.

The only real difference is that WeWork can improve their revenue/sqft by adding desks without tearing down walls or remodeling the building; and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. But on the downside, they have shorter lease terms, which makes their earnings less stable and more responsive to market conditions (ie: it's easier to stop paying WeWork during a market downturn that it is for a traditional landlord).

The question is, are WeWork properties similar to Boston's properties, and does WeWork generate 5x the revenue/sqft as Boston on similar properties.

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

#22

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.

Indeed, they go there for the foosball, table tennis, coffee and self-congratulation. Sure, sure, physical proximity to other startups, mentorship, etc. - but frankly the impression I've got from each wework location I've been to has been of people wanting the "startup lifestyle" rather than wanting to build a business. The actual startup lifestyle is sweating in a cheap grotty office, rice, and sleeping under your d…

People want to feel trendy. They are not running "Startups" because they want to build stuff that scales. They are running mostly failed businesses that look trendy/cool, so that they can "fit in".

Selling emotions is a big business. Lots of brands are relying on it.

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

#25

Earlier quoted context omitted.

Can access via social media (just do a search on twitter for the article) or via the Read Across The Aisle app/Chrome extension, which is free and includes a free pass to the WSJ (disclosure: I am the founder).

I did that and am trying to access via Twitter but just hit the same paywall.

Could be a browser cache thing. Try accessing from Twitter in incognito.

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

#26
post #15

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.

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.

I had the same experience, although I didn't end up using wework because they gave me a runaround on location (I wanted manhattan space and they were clearly trying to get ppl to lease in dumbo, this was a while ago).

I 100% agree that the switching costs are very low in this kind of market.

It's good to hear their execution has improved. when I asked them if they had space in a manhattan location, they essentially couldn't (or wouldn't) tell me.

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

#28
No asset valuation bubble driven by years of cheap money and privately held closed books, folks! This time it's different...

If you've lived in the area or industry more than 10 years, you know how this story ends, especially regionally where real estate commercial and otherwise is in a cojoined overvaluation.

EDIT: next in my browse list, today...

https://techcrunch.com/2017/10/18/blue-apron-is-laying-off-6...

https://www.theatlantic.com/technology/archive/2017/10/stock...

etc...

When tech crashes, the soft recovery is going to a lot uglier to a lot more people...

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

#29
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.

It's called working from home, and it's a lot more than 20% less.

Not if you regularly have clients come around for meetings or colleagues for a chat. WeWork provides a good enough atmosphere to work and socialise with work related people (it's not just the desk you're paying for).

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

#30

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.

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN. At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord. The only real difference is that WeWork can improve their revenue/sqft by a…

> and they can increase prices at a faster rate than a traditional landlord who has a longer lease term.

They can also lose clients much quicker than a landlord that has longer lease terms.

The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

Post reply on HN