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The Property Industry Is Falling Out of Love with WeWork

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Re: The Property Industry Is Falling Out of Love with WeWork

#21

Post by olleromam91 »

munk-a wrote: post #15
jonahhorowitz wrote: post #4

The existing commercial office space system seems very inefficient for small to medium-sized companies. You lease space, spend a ton renovating it to look "on-brand," then move a couple of years later. The next tenant renovates the space again to match their brand. Each remodel comes out of a "tenant improvement budget" given by the landlord, but that has to be recouped in rent over the duration of the lease, so it's…

> spend a ton renovating it to look "on-brand," Wait, why? If you're a small-medium sized company that isn't in retail (or some other business where you, as a matter of course, service customers on premises) why would you divert a significant amount of money to renovations that match your brand? If you need to meet with investors or potential employees and are that concerned about appearances then just do it offsite.

See "workplace identity"

Re: The Property Industry Is Falling Out of Love with WeWork

#22

Post by dylan604 »

munk-a wrote: post #16
dylan604 wrote: post #14

Earlier quoted context omitted.

There are things they consider difficult. The building is responsible for all tenants in the building. Things like key card access to the building after hours, key card access to the parking structure, etc are all handled by the building. If the shared office space tenant is constantly asking management to revoke keys, issue new keys, etc, that becomes a pain point for them. In my experience, it was the key card acce…

Assuming the sub-leasor wasn't trying being dishonest, they should remain the primary responsible party to the leasor. I work for a company and have never met the person owning the building, but if I wrecked the hallway the owner would quite correctly go and talk with my employer. The only way I see this becoming an issue is if WeWork was being shifty about taking responsibility for damage and risk caused by their cl…

Maybe, but they are just "weird" about things outside of their comfort zone. I worked for a company in a CBRE building that had lawyers, financial planners, etc types of tenants. The company I worked for was a film/video post-production company. The obstacles the building put in place to the company to move in gave every clear indication that they really did not want that company as a tenant. For example, in the raised floor machine room, they wanted smoke detectors every 3 feet because of the "fire-hazard" VTR machines represent. All of the low-voltage video cabling for SDI video signals had to be run through EMT conduit. All low-voltage CAT-5 networking cabling had to be run through conduit as well. There were many more examples of the things that other tenants would not be asked to do. Also, a $1,000,000.00 escrow account had to be opened for the entire term of the lease. These are all sorts of things that make me think the building were just trying to find the point where the owner of the company was say it's not worth it. We've all been there with jobs that we don't really want, so we try to price ourselves out of the running with an outrageous bid.

Re: The Property Industry Is Falling Out of Love with WeWork

#23

Post by Fomite »

jvagner wrote: post #19
munk-a wrote: post #15

Earlier quoted context omitted.

> spend a ton renovating it to look "on-brand," Wait, why? If you're a small-medium sized company that isn't in retail (or some other business where you, as a matter of course, service customers on premises) why would you divert a significant amount of money to renovations that match your brand? If you need to meet with investors or potential employees and are that concerned about appearances then just do it offsite.

Every small company I've every worked for has renovated their new space. Often, when the old tenants leave, the space is beat-up and unpresentable. Relative to the aggregate cost of rent over a couple of years, spending $10-20K to buff it out, put some walls in for meeting rooms and offices, etc... isn't a problematic spend.

I think there's a difference between "New carpet, new paint" and other refurbishments like that, and "spend a ton to look 'on brand'."

Re: The Property Industry Is Falling Out of Love with WeWork

#24

Post by rlucas »

sharemywin wrote: post #2

Unicorn playbook: 1. Jump on hot tech trend threatening to disrupt industry 2. pay way too much for customers 3. get lots of VC money and use VC money to pay way too much for more customers 4. grow gargantuan 5. transform into basically every other non-tech big player in the industry because zero marginal cost only works in few industries

Simpler WeWork version:

1. Borrow short.

2. Lend long.

It works until it doesn't.

Normally, though, the people who do this are banks, so we regulate with capital requirements and protect smallholders with deposit insurance.

When the people doing it are a massively leveraged real estate investment pool, masquerading as a disruptive tech startup, it's a lot less clear what happens when the music stops...

(For those not intimate with the finance side: WeWork is making super-long-term commitments of big dollars, and then microchunking them into super-short-term commitments. This is like a bank making long-term big loans by aggregating short-term demand deposits. In both cases, as long as there's a ton of short-term players to work with, you're safe. When there's a "run on the bank" the short-timers all leave quickly, but the institution's long-term obligations can't be unwound, leading to insolvency.)

Re: The Property Industry Is Falling Out of Love with WeWork

#25

Post by jelling »

"Brokerage CBRE Group Inc. in October launched a business called Hana that will help landlords create their own flexible offices. Owners want to be a part of the rising demand for that type of space, said Andrew Kupiec, Hana’s CEO."

Good luck trying to create a nice product with a federation of people with zero product experience. You'll be training them / fighting the same battles over and over. And just wait until they bring in their family members who have great ideas.

Re: The Property Industry Is Falling Out of Love with WeWork

#26

Post by ABCLAW »

Fomite wrote: post #23
jvagner wrote: post #19

Earlier quoted context omitted.

Every small company I've every worked for has renovated their new space. Often, when the old tenants leave, the space is beat-up and unpresentable. Relative to the aggregate cost of rent over a couple of years, spending $10-20K to buff it out, put some walls in for meeting rooms and offices, etc... isn't a problematic spend.

I think there's a difference between "New carpet, new paint" and other refurbishments like that, and "spend a ton to look 'on brand'."

Depends what class of building you're renting in. A Class B building might tidy up the place, but if you're springing for a Class A building, prestige is what you're buying into.

Re: The Property Industry Is Falling Out of Love with WeWork

#27

Post by fullshark »

rlucas wrote: post #24
sharemywin wrote: post #2

Unicorn playbook: 1. Jump on hot tech trend threatening to disrupt industry 2. pay way too much for customers 3. get lots of VC money and use VC money to pay way too much for more customers 4. grow gargantuan 5. transform into basically every other non-tech big player in the industry because zero marginal cost only works in few industries

Simpler WeWork version: 1. Borrow short. 2. Lend long. It works until it doesn't. Normally, though, the people who do this are banks, so we regulate with capital requirements and protect smallholders with deposit insurance. When the people doing it are a massively leveraged real estate investment pool, masquerading as a disruptive tech startup, it's a lot less clear what happens when the music stops... (For those not…

This from the story is news to me:

"WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk."

So basically the institution's multiple long-term obligations can be handled by killing the leases that are the least profitable right?

Re: The Property Industry Is Falling Out of Love with WeWork

#28

Post by toomuchtodo »

jelling wrote: post #25

"Brokerage CBRE Group Inc. in October launched a business called Hana that will help landlords create their own flexible offices. Owners want to be a part of the rising demand for that type of space, said Andrew Kupiec, Hana’s CEO." Good luck trying to create a nice product with a federation of people with zero product experience. You'll be training them / fighting the same battles over and over. And just wait until…

It is straightforward to provide consistency with a franchise model, as many large well known brands demonstrate every day (Subway, Dunkin', Anytime Fitness [which is basically WeWork as a gym], any number of hotel brands, etc). If you don't meet the brand standards, you get the boot and lose your investment.

Re: The Property Industry Is Falling Out of Love with WeWork

#29

Post by jwarren116 »

jelling wrote: post #25

"Brokerage CBRE Group Inc. in October launched a business called Hana that will help landlords create their own flexible offices. Owners want to be a part of the rising demand for that type of space, said Andrew Kupiec, Hana’s CEO." Good luck trying to create a nice product with a federation of people with zero product experience. You'll be training them / fighting the same battles over and over. And just wait until…

It’s my understanding that the Hana offering is run entirely by CBRE, much in the way CBRE will manage buildings as a service. I would assume it’s an offering for the owner/landlord where they (landlord/owner) would be hands off and there would be a split with CBRE.

https://www.cbre.com/real-estate-services/directory/flexible...

Disclosure: I work for CBRE, but in a different line of business with no knowledge of Hana outside of what is explained by the above link.

Re: The Property Industry Is Falling Out of Love with WeWork

#30

Post by Spooky23 »

stevehawk wrote: post #7
turc1656 wrote: post #5

Earlier quoted context omitted.

You forgot the part about disregarding laws/regulations and trying to grow fast enough so that by the time the regulators start to apply pressure you have enough money and clout to fight back, all while preventing the smaller guys from doing the same thing you did. Not saying that WeWork is doing that, but it's definitely a time-honored Silicon Valley approach. Just look at the recent faux pas from Robinhood with the…

Amazon was not unprofitable. They just constantly reinvested their profits back into their company instead of hording cash.

That’s called losing money.

Amazon has to make those investments to continue the rocket ship growth that justifies the share price.

Once the growth stops, boom.

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