Co-working firm WeWork has delivered one of the year’s most eye-popping business fiascos. At first among the most highly valued start-ups of all time, the company’s valuation has now plunged from a heady $47 billion to less than $10 billion, its highly publicised float is indefinitely at sea and charismatic CEO Adam Neumann has been ousted amid a storm of controversy.
The downfall was even more dramatic due to the speed of WeWork’s ascendancy. When the company launched in 2010 its timing was perfect. New York was suffering high office vacancy rates and landlords welcomed the coworking concept that provided flexible office space options with open arms. Within a year, WeWork doubled in size and, by 2015 had around 23,000 customers in 32 locations renting desks for as low as $A70 a month. Then things really took off when cashed up Japanese venture capital firm Softbank decided WeWork would be its next golden goose and committed $9 billion, at a valuation of $47 billion, to become the company’s biggest investor.
The trouble was, not at any point was WeWork profitable, a fact that left many baffled over its revered status and stratospheric valuation. But this year the inevitable occurred when WeWork unravelled in a string of losses and its IPO collapsed. Neumann stepped aside on September 24, and in October Softbank took over, buying back about $3 billion worth of WeWork stock as the company’s valuation dropped to around $8 billion, the Wall Street Journal reported. New management has since distanced the company from the controversial Neumann. “No one has seen anything quite this big or strange go down before,” observed Amol Sarva, CEO of up-and-coming office space provider Knotel, in an interview with Bloomberg.
Life goes on
Yet despite a spectacular fall from grace, WeWork – as well as the concept of coworking at large – are forging ahead. In a media release dated December 5 WeWork announced a record 52 locations opening across the world this month and still describes itself “the world’s leading coworking and space-as-a-service platform.” Those new locations include 24 in the US, Canada, and Israel, and 28 in cities across EMEA, Latin America, China, the Pacific, and Japan.
However in Australia, as in many other parts of the world, WeWork has in recent months walked away from several large lease deals. Those deals include a plan for WeWork to take over 20,000 square metres at 55 Market Street Sydney and another in Melbourne for 15,000 square metres in the former ANZ headquarters at 100 Queen Street.
Whatever the future may hold for WeWork, coworking appears to have a solid future. The CBRE 2019 Australian Office Occupier Survey released this week reveals a number of solid societal and workplace trends underpinning the need for flexible coworking office spaces. These are pegged to a few key shifts in occupier demand: tenant desire that landlords give them more and better perks so they can attract and retain talent, plus occupier’s evolving requirements for greater flexibility.
WeWork of course isn’t the only viable coworking option either. Plenty of large successful companies provide alternatives to WeWork with fast moving global leader IWG - the biggest multinational player in the coworking space - topping the list. Founded in Belgium in 1989, IWG provides serviced offices, coworking spaces, business lounges, virtual offices, meeting rooms, and video teleconference services to more than 2.5 million customers across 3500 offices. It is listed on the London Stock Exchange, worth more than $3.9 billion, follows a corporate philosophy of slow and steady growth and is the parent company to global co-working brands Regus and Spaces. Regus appeals to new businesses seeking a corporate rather than funky start-up appeal while Spaces provides communal-style locations aimed primarily at contemporary start-ups.
Rapidly changing markets are making it more difficult than ever for businesses to predict long-term needs for headcount accommodation, the CBRE Australian Occupier 2019 survey found. For this reason, demand will only continue to rise for adaptable office space capable of dealing with rising and falling staff numbers. Workspaces must also deliver curated experiences so tenants can “focus more deeply on the job at hand rather than ensuring the space is working for them”.
Flexibility in the time, day and location of work is an increasingly significant influence on the shape of workplaces, according to the survey. “Forbes identified that 92% of Millennials identify flexibility as a top priority when job hunting - as employers evolve their policies to match demand, this creates further challenges in accurately predicting the demand and utilisation of workspace. The next generation of flexibility may see teams establishing satellite hubs in coworking centres, closer to their homes or a client/project site.”
Another major driver of coworking industry is the gig economy. Three-quarters of CBRE’s survey respondents used contractors and freelance workers while 25% of these expected to use more in future. What’s more, as many as 80% of executives expect contingent and freelance workers to substantially replace full-time employees in coming years according to the Mercer Global Talent Trends 2019 Report.
More gig workers meant greater variability in headcount, and coworking spaces are a natural solution, CBRE researches concluded. “Coworking and turn-key solutions will be necessary to accommodate a new influx of workers to quickly ramp up and be engaged and productive, and this will especially be the case for businesses seeking to attract top gig workers but don’t have the office environment and experience to do so.”