
WeWork’s Escape Plan Is Buried in the Books at Its Tokyo Office - jc_811
https://www.bloomberg.com/news/articles/2019-11-24/wework-s-escape-plan-is-buried-in-the-books-at-its-tokyo-office
======
9nGQluzmnq3M
> _Mori Building Co. agreed to lease two floors in its Ark Hills complex and a
> penthouse space at a recently opened building called Ginza Six._

This is literally some of the most expensive real estate in the city, and
office space in central Tokyo is not cheap. I'm amazed that they can find
enough tenants to sublet this at a profit.

That said, WeWork does have a Japan-only advantage here, because startups
generally find extremely hard to lease office space there: even if they can
find a landlord willing to take a punt, they are often required to pay one to
two _years '_ rental as deposit. [1] This won't help them scale outside Japan
though.

[1] [https://www.venturejapan.com/doing-business-in-japan/how-
to-...](https://www.venturejapan.com/doing-business-in-japan/how-to-manage-a-
japanese-company/japanese-office-lease-rent/)

~~~
drak0n1c
I used a WeWork credit to work remotely while in Tokyo around a year ago, and
the place was packed. Every common seat was filled and I even felt like I was
getting in the way because of how often people were going around me to banter
or talk shop. Also the internal WeWork forums in Japan seemed to be a genuine
social network with heavy Linked-In style participation.

I'm sure some of the hustle and bustle is due to the novelty, much like how
WeWork was when it first launched in the US. However, you're right that there
is a real lack of flexible month-to-month space in Japan so that may be a
lasting advantage.

~~~
greggman2
WeWork might be full but there is co-working space all over the city, some of
them hourly or daily, most of them are not full at least when I've visited.
There must be 50 or more in Shibuya alone.

~~~
mikekchar
I don't know how expensive WeWork is, but the co-working spaces in Shibuya are
crazy expensive (like $10 per hour). There are many sento (public baths)
around Japan that will let you stay for $10 for the whole day and where you
can get a desk and power. When I'm travelling that's what I tend to do. Since
I live in the countryside, I'm also used to being able to work at public
libraries. I was really surprised that in most libraries I've gone to in big
cities they specifically forbid working (or have special sections with high
prices).

But anyway, maybe I haven't seen the cheaper Tokyo co-work spaces. If you have
some convenient points, I would appreciate a pointer!

Edit: I'm actually in Shibuya every few months. When I'm there I work in the
Shizutetsu bus station. If you see a middle aged white guy there programming,
come say hi ;-)

~~~
Legogris
When was the last time you looked around at coworking spaces? The market has
grown quite a bit, and this has made it easier to find reasonably priced
alternatives.

I don't remember the specifics off the top of my head, but I'm sure there
are/have been ~300 yen/h ones in for example Shibuya.

There's a smaller one called Open Source Cafe that lies a 5~10 min walk from
Shimokitazawa station - that it's off makes it quiet and nice, and they host
meetups from time to time.

The market rate for a fixed-desk designated membership seems to lie around
40,000 JPY / month in the hotter areas like Shibuya and Shinjuku, which is
~20$ per day if you only go there for weekdays. I think that's quite
reasonable. I think WeWork has been part of driving this change, but it's
definitely overpriced as things are now.

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ianferrel
>Moreover, SoftBank itself has been a big contributor to that high level of
occupancy. The Japanese conglomerate and its subsidiaries take up about 20% of
WeWork’s office space in Japan, the people said. Over the years, WeWork pushed
its locations worldwide to attract corporate clients because those contracts
are more lucrative and stable. But Japan had a higher proportion of enterprise
customers from the start, beating the 40% global average.

WARNING, WARNING, WARNING!

It's a lot easier to be profitable when your owner buys 20+% of your services.
Also easier to get more than 40% institutional customers when the boss puts
his thumb on the scale for the first half of that...

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jaredsohn
>on the scale for the first half of that..

I think your math is wrong. The denominators vary for the different percents.
(Edit: nope, mine was.)

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ianferrel
Can you explain what I'm doing wrong?

Softbank buys 20% of their Japan space, so in order to get to 40+% they just
need to find institutional investors for another 20+%? The denominator for
both is "capacity at Japan office"

~~~
kdmccormick
I think your math depends on all the office space being occupied (so that
$total_customers == $office_space). Maybe that's what GP is pointing out.

That doesn't really affect your original point though.

~~~
ianferrel
Ah, you are correct. I think it actually _strengthens_ my point, right?

If Softbank is renting 20% of space, and less than 100% of space is rented,
then they count for _more_ than 20% of the customer base being institutional.

~~~
kdmccormick
Sounds right to me!

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ben_jones
Wework is still a great investment because Wework is doing well in Japan \s.

Pay no mind that:

> WeWork entered Japan when office vacancy rates were near a decade low. The
> supply has tightened since to around 1%, a level not seen since the 1990s,
> allowing landlords to raise rents, while requiring a deposit of as much as a
> year’s rent.

They've got a great new product too:

> The new Passport service would give tenants flexible use of desks, community
> spaces and meeting rooms, amenities for which visiting customers currently
> have to pay extra. The service is a work in progress, but if adopted, WeWork
> aims to set aside a certain number of desks at all locations for Passport
> users, the people said. The move is aimed at increasing occupancy, the key
> to making locations profitable.

And forget that:

> Moreover, SoftBank itself has been a big contributor to that high level of
> occupancy. The Japanese conglomerate and its subsidiaries take up about 20%
> of WeWork’s office space in Japan, the people said. Over the years, WeWork
> pushed its locations worldwide to attract corporate clients because those
> contracts are more lucrative and stable. But Japan had a higher proportion
> of enterprise customers from the start, beating the 40% global average.

~~~
glup
You missed that they have new heatmaps of office occupancy, which somehow mean
that they are developing competencies in “AI.”

At least the layoffs will be humane!

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rossdavidh
Well, maybe for a little while. The big difference seems to be that WeWork
Japan didn't over-buy and under-price as much as WeWork did everywhere else,
and the office market is tight so they have high occupancy rates.

Well, that makes sense and all, but it says nothing about the more fundamental
problem with WeWork's business model, which is whether or not it will go
bankrupt when it hits its first recession, occupancy rates generally plunge,
and WeWork has more short-term commitments from its customers than it has to
its landlords. Perhaps there's something in WeWork Japan that addresses this,
but if so, it's not mentioned in the article.

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Traster
>Son, who has said his investment strategy is to focus on companies powered by
artificial intelligence, is eager to move WeWork beyond its real-estate
beginnings. Briefing analysts after last earnings announcement, SoftBank’s
founder bristled at the suggestion that WeWork doesn’t match that profile. He
said that he’s long pushed WeWork to make better use of its data, but progress
has been slow. The company will now begin experimenting with AI in Japan and
could be ready to introduce it more broadly in as little as six months, Son
said.

This part kills it for me. WeWork pumped their valuation by pretending to be a
tech business when they're actually a office rental business. Son is still
pushing that, he genuinely believes a bit of machine learning pixie dust is
going to push occupancy up and make the company profitable but there is no
reason to believe this. Frankly, I suspect if you do create an AI that's
predicting and managing your occupancy then you're better off letting it go
trade the stock exchange.

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HeXetic
Just wait until they start talking about somehow leveraging blockchains as a
possible solution...

~~~
rchaud
Knowing what we now know about WW's various side businesses, I'm honestly
quite surprised that they never launced WeCoin when the crypto craze of
2017-18 was in full swing. But perhaps useless tokens are only the go-to
option for businesses that don't have a patron saint like M. Son.

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willart4food
Uber for Office Space or AirBnB for Office space?

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jchallis
Why the Initech of Office Space!
[https://en.wikipedia.org/wiki/Office_Space](https://en.wikipedia.org/wiki/Office_Space)

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hooloovoo_zoo
[https://youtu.be/vDu74eMv5ME?t=22](https://youtu.be/vDu74eMv5ME?t=22)

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1-6
Amongst Mt. Gox?

