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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

#91

Post by baxtr »

I worked in a wework Office for about a year. At first I thought the environment was great, I loved the free beer and the community. However, once we moved out, I realized how much more productive we were in our own office. We had

- more space

- less noise, in terms of sound and visually (you see everybody passing by through the glass and have to force yourself not to look at them. For a while we had some posters up, but we had to remove them since wework’s company policy doesn’t like that)

- less distractions: in the end, the community was nice, but it didn’t help us that much, since it was quite random, there were a lot events, almost every day, the place was always busy

- climate service: we had so many issues with heating/cooling, either it was too hot or too cold, it never got really fixed

- cost: their meeting room system is a total rip-off, even though basic rents are okish, the meeting rooms were a real cost sucker, in many months we’d pay almost as much for meeting rooms as the basic rent

We liked the culture and the spirit, but we’re much happier in our own space now, we don’t pay for meeting rooms and we can meet our relevant community whenever we want, distractions went down, productivity up.

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

#92

Post by eric_h »

sillysaurus3 wrote: post #73
rezistik wrote: post #69

Earlier quoted context omitted.

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 gra…

> Your office even has beautiful floor to ceiling windows that gives you a nice view of downtown and sunsets.

s/Your office/some offices

My company currently has an office in the middle of the floor of a WeWork building, it's cramped for 4 people, and the only "views" I have are of the walls of neighboring buildings in the windows that I can see through ~4 other offices and are ~80-100ft away (but, times are a bit tough right now and I think we're getting a pretty good deal for an NYC WeWork office).

In general though, WeWork is pretty solid; their coffee is acceptable, and the beer is usually pretty good.

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

#93

Post by untog »

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…

> Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!

That doesn't scale though. If everyone who worked in a WeWork space wanted to occupy an empty room with a door that closes you'd discover pretty quickly what a hot commodity the are. And that can change entirely out of your control - I've worked at a relatively empty WeWork, only for a large company to come in and take over a lot of space on my floor. Suddenly all the fantastic facilities aren't available any more.

All in all, WeWork is fine, but not in any way worth the money.

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

#94

Post by eric_h »

CPLX wrote: post #88
627467 wrote: post #56

Earlier quoted context omitted.

Sounds as convoluted as McDonalds Corp business model...

Yeah except McDonalds owns the valuable real estate and pushes off the occupational and downturn risk to the franchisees. The WeWork business model is literally the exact opposite of this. If things go well their landlord makes a windfall on the appreciation. If there's a sharp downturn they're stuck with the lease and no members. The business model has the potential to be obviously and severely problematic, which is…

If I'm not mistaken, WeWork owns a number of the buildings in which they have offices. Not sure what the percentage is.

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

#95

Post by untog »

eddieplan9 wrote: post #10
neaden wrote: 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.

> Similarly, people don't go to WeWork because they need a desk.

Err, yes they do. I don't doubt that WeWork has an above average number of startup entrepreneurs in their office spaces, but every WeWork I've been in also has a lot of self-employed people who just want a small office space to work in.

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

#96

Post by CPLX »

eric_h wrote: post #94
CPLX wrote: post #88

Earlier quoted context omitted.

Yeah except McDonalds owns the valuable real estate and pushes off the occupational and downturn risk to the franchisees. The WeWork business model is literally the exact opposite of this. If things go well their landlord makes a windfall on the appreciation. If there's a sharp downturn they're stuck with the lease and no members. The business model has the potential to be obviously and severely problematic, which is…

If I'm not mistaken, WeWork owns a number of the buildings in which they have offices. Not sure what the percentage is.

It may have changed very recently I suppose, but with that caveat aside I believe you are, in fact, mistaken. The business model for the company has always been lease arbitrage. There was discussion at one point[0] of them having a related entity to purchase real estate, but I'm not sure what came from that, and even in that plan it was to be a separate investment vehicle, not the VC backed company being discussed here.

[0]https://therealdeal.com/2016/10/14/wework-wants-to-become-a-...

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

#97

Post by tptacek »

sillysaurus3 wrote: post #83
tptacek wrote: post #79

Earlier quoted context omitted.

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…

Do you think they can figure out a way to still be around in ten years? It's so much better than traditional offices that it'd be a shame to lose it. Hopefully there's a sustainable business model. What would you say are the pros/cons of moving to your new office? The West Loop WeWork is nice because it's about a 3 minute walk from the redline subway to the front door. That matters during winter -- Chicago winters bl…

We're still in Fulton Market, on May and Hubbard, a short walk from the Blue Line on Grand. I'm not entirely sure how we got this office in this specific location, but I think it had to do with the building itself being on the market.

I should be clear: it's hard to compete with WeWork for the 4 people we have in this office (I think we pay slightly less here than we'd pay for 4x WeWork berths) --- but having our own office is a phenomenally better deal as we hire more people, since we'll be paying the same amount of money in rent but can easily park another 10 people in this space comfortably.

So I should clarify that I think WeWork is an amazing deal for very small companies and, in particular, for solo worker locations. Part of the problem with WeWork is that it's precipitously less of a good deal as your company grows.

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

#98

Post by karmelapple »

geoffw8 wrote: post #72
TYPE_FASTER wrote: post #70

Earlier quoted context omitted.

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.

I guess it depends what you're looking for, everything from price point to frequency of use.

I have a Businessworld Gold membership, and for its price (which is significantly lower than a similar WeWork membership), I can visit any "business lounge" location in the world. I don't use it every day, nor even every week, but when I'm on travel, I have relied on knowing they will have solid internet and a relatively-quiet place to focus.

For the price and my use case of infrequent visits, Regus is fantastic.

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

#99

Post by eric_h »

CPLX wrote: post #96
eric_h wrote: post #94

Earlier quoted context omitted.

If I'm not mistaken, WeWork owns a number of the buildings in which they have offices. Not sure what the percentage is.

It may have changed very recently I suppose, but with that caveat aside I believe you are, in fact, mistaken. The business model for the company has always been lease arbitrage. There was discussion at one point[0] of them having a related entity to purchase real estate, but I'm not sure what came from that, and even in that plan it was to be a separate investment vehicle, not the VC backed company being discussed he…

I heard, from someone who works for WeWork, that they do own at least some of the WeWork buildings in Manhattan. Admittedly it was a low level employee, so he could have been mistaken.

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

#100

Post by nodamage »

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…

> Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!

Not sure if this is the case for all of their locations, but the doors (and walls) were made of glass at the WeWork we rented from in Seattle, which meant there was zero soundproofing and I was constantly hearing conversations from the people in adjacent offices. It was incredibly distracting and we only lasted a month before returning back to our home office.

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