
The Property Industry Is Falling Out of Love with WeWork - pseudolus
https://www.bloomberg.com/news/articles/2018-12-19/wework-keeps-pushing-now-landlords-rivals-are-pushing-back
======
jacquesm
I absolutely hate WeWork. Due to the nature of our work we have to meet with
people there in various locations, the security on-site is laughable but at
the same time they make you jump through all kinds of hoops such as
photographing you face-first on entry, easily defeated by blocking the camera.

The facilities are noisy, distracting, totally unusable to discuss anything
that is even remotely confidential and there is a reasonably high amount of
theft by walk-ins that make off with people's laptops or phones.

The sooner they bugger off the better.

~~~
tedivm
Strong agree. My current company was in one for a few months before we got our
own space, and it was one of the most miserable office experiences I've ever
encountered. Almost everything about it sucked-

* Their network was grossly misconfigured and directed traffic to the least used access point, regardless of the distance. It was a regular morning ritual for people in my office to toggle their wifi on and off repeatedly until they got a usable connection.

* Network security is also a joke- they have a simple WPA2 shared password that never changes, can easily be brute forced, and is the same at all locations. They do have a proper WPA2 Enterprise setup for their employees, which means the issue isn't their equipment and that they understand the difference between the two.

* They basically have no rules about noise. Their contract refers to the local "communities" rules, but when I asked for them I was told they didn't have any. So when there was bad behavior (which there was plenty of) there was no recourse.

* It was the noisiest office space I've ever worked in. The glass dividers between rooms and open ventilation systems meant there was no insulation from noise at all- and tenants didn't seem to care about letting their entire floor know their business.

* There were only two or three phone rooms per floor, and it was always a fight to get them. People would try and reserve them by leaving their stuff in them before a call, which just amounted to all sorts of drama. Since there weren't enough to go around people would just talk in their offices adding to the noise.

* Allowing dogs is great, but there need to be some rules. One of our neighbors just let his dog walk around the whole floor, so we had to be super careful about what we left in the trash in our unit. He would also leave his dog locked up in his unit while he was getting lunch, and the dog would bark the whole time. People would also have their dogs race from one side of the building to the other. Since none of this was against the rules there was nothing to do about it other than move out.

~~~
x0x0
My experience matches.

The lazy jerks running 6th and Market let one of the two elevators sit broken
for _months_. Free 20 minute break mid-day to get downstairs and again to get
back upstairs! Who doesn't want takeout to take over an hour every day! The
wework folks renting 6 floors just acted like there was nothing at all they
could do to get the building to have sufficient working elevators.

And the noise. Hard wood floors. No carpets. Glass walls. One woman wearing
heels goes clack-clack-clack up and down the hall.

Bathrooms with no vent fans.

Running a remodel of the floor above us while we were supposed to be working
in the office. So much noise you could feel the vibrations.

Same fight for phone rooms.

It was utterly awful. But hey, free beer!

We moved out when employees threatened to quit.

------
Animats
Uh oh, another overpriced company funded by Softbank. Softbank, remember, is
funded by Saudi Arabia's sovereign wealth fund. They're also behind Uber. They
seem to be the world's largest source of dumb money.

I wonder what the big customer lease deals with WeWork look like. They
probably don't get the markup they do with little tenants.

~~~
0x8BADF00D
As the recession deepens, WeWork will surely eventually implode. I can see it
now: vast swathes of empty commercial real estate. If you thought ghost malls
were bad, wait until you see ghost WeWorks.

~~~
chimeracoder
> As the recession deepens

 _Deepens_? We're not in a recession, and we haven't been for nearly a decade.

It's true that, by historical standards, we're arguably _overdue_ for a
recession, but the word "recession" is precisely defined, and the US
unambiguously does not meet the criteria for being in one.

~~~
kortilla
>Deepens? We're not in a recession, and we haven't been for nearly a decade.

There is a non-negligible portion of people who have bought into the political
narrative that “stock market volatility = recession”. It’s political in the
sense that “the economy can’t possibly be good with the current leadership”.
Don’t waste your breath arguing with it because it’s politics, not facts or
rationality.

------
pimlottc
> WeWork forms a subsidiary to represent each lease deal, which means
> individual locations could fold without leaving the company itself with much
> risk. The parent company only guarantees the lease for about six to 12
> months on a 15-year agreement, according to documents associated with
> WeWork’s inaugural bond offering.

So, they sign a 15-year lease but are only on the hook for the first year? How
does that work? Sounds more like a year lease with an option to extend?

~~~
crazygringo
The subsidiary signs the 15-year lease, not WeWork.

So basically if the location turns out to be unprofitable, the subsidiary goes
out of business or goes bankrupt and WeWork isn't stuck with the lease.

From the landlord's perspective, yes it is basically equivalent to a year
lease with option to extend... not totally clear why the landlord would agree
to that.

~~~
gowld
Must be nice to be an immortal corporation that can just spin off any debts
you don't want to pay, while mere mortals with finite lifespans and education
debt and medical debt and credit card debt cannot unless we die.

~~~
RhodesianHunter
What if I told you that you can create and own corporations too?

~~~
apatters
Your comment seems disingenuous. What if I told you that piercing the
corporate veil is regular and common when a single member LLC can't pay its
debt, and an LLC isn't eligible for things humans need to improve their
futures like student loans anyway?

~~~
Joakal
Fantasy stories intrigue us mortals. But we do see big companies or llcs dodge
responsibility.

------
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.

~~~
hbosch
What’s WeWork’s “product” again? Exposed brick and free beer? Seems like the
only roadblock to successful emulation here is money and property — both of
which CBRE has. You can hire someone for the interior design. They already
split off a new brand with a fun, easy name.

~~~
grigjd3
WeWork's product is handling landlord and broker negotiations for you. They
are giving more power to the tenant as WeWork is large enough that they often
carry significantly more leverage into a negotiation.

~~~
eropple
WeWork has leverage that they convert into _a lot_ of arbitrage. I'm not so
convinced of the value there.

~~~
Analemma_
Businesses love to throw money at a problem so it Just Works and they don’t
have to think about it. This shouldn’t be surprising: a large percentage of
the enterprise software industry, including most cloud computing, runs on this
tendency. WeWork is just extending this idea into the realm of physical office
space.

------
jonahhorowitz
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
not really free money to the tenant.

Having offices that have already been remodeled to be nice enough, and just
being able to lease a flexible number of desks could deliver huge savings - in
time and cost to growing companies.

~~~
munk-a
> 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.

~~~
jvagner
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.

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

~~~
ABCLAW
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.

------
ddavis
I was talking to a friend the other day who told me about multiple recent
grads from their PhD program joining tech companies that were willing to pay
for a shared work space office for remote employees. One said it was
significantly cheaper to expand their team with remote employees and offer to
pay for WeWork spaces than to expand the physical office space they already
had (new hires got to choose what they wanted to do).

~~~
SOLAR_FIELDS
It’s definitely a business model that fills a niche. And it clearly offers
value. The problem is that when the economy tanks these sort of arrangements
will be the first to go as the tech companies trim expenses and either
relocate the employees, fire them, or force them to work from home. It seems
at this point that WW has a great offering when everyone has money, but the
second the economy turns they are going to be the ones holding the proverbial
bag.

------
resg4mp
Their business model reminds me of MoviePass in the sense that it appears
unsustainable, and that their main plan is to grow fast until they have market
power to throw around. At least the math for WeWork isn't so obviously flawed
as Moviepass was. I'm just disappointed at how many companies use this
playbook in the startup world. Everyone just does stupid crap in hopes of
becoming the "dominant platform", at which point they can charge whatever they
want and people will have to play along.

~~~
edanm
Or, think about it in a more positive way - companies like WeWork take money
from investors, and pass it on to consumers, via subsidised pricing. I'm very
happy to have cheaper office space, if only for a few years, until VC money
dries up (although I have no idea if that is actually the case with WeWork).

------
dylan604
I was using space at a WeWork like company. This company was leasing office
space from a building managed by CBRE. If you have any familiarity with CBRE,
then you know that a shared office environment is totally against everything
CBRE does. I do not know how long this particular shared office was there, but
it recently closed back in October because of friction with CBRE.

I don't think the shared office space concept is a bad one, but
landlords/building management companies will fight it for a long time. I'd
imagine it to be an easier time for the shared office space companies to buy a
building rather than trying to release a leased space.

~~~
reaperducer
_If you have any familiarity with CBRE, then you know that a shared office
environment is totally against everything CBRE does_

CBRE Launches New Coworking Brand, Hana: [https://allwork.space/2018/11/cbre-
launches-new-coworking-br...](https://allwork.space/2018/11/cbre-launches-new-
coworking-brand-hana/)

~~~
gumby
How does this fit with [https://www.hanahaus.com](https://www.hanahaus.com)
which already exists?

(note: I've never used Hana though I walked through the one in Palo Alto just
out of curiosity, and it simply looked like a random co working space).

~~~
mbesto
HANA Haus is named after SAP's database product HANA. It's more of a coffee
get together than a co-working space (unless they've deliberately changed it
since I've last been there).

~~~
Scotty123
Actually its mainly a coworking space with a blue bottle in the building as
well. I got open seating just $3 an hour. Has louder areas or you can reserve
quieter spaces/meeting rooms.

------
sharemywin
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

~~~
turc1656
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
their "checking & savings" accounts that got them bitch slapped nearly
instantaneously by regulators, forcing Robinhood to withdraw the announcement
and update it to a "cash management" account with details to follow.

Same for companies like Amazon. Grow super fast and ignore tax laws regarding
nexus so you don't pay sales tax. And run a massive loss for years on end
until you can figure out how to subsidize your losses through another
profitable venture which you hope to achieve. They did with their AWS/cloud
business and that makes the company _as a whole_ barely profitable. But
subsidizing your massive retail business losses with your high cloud margins
is supposedly illegal. Number of regulators anywhere to be found? Zero. And
don't forget to have an advantage against all the third party sellers because
you can undercut them since you also sell millions of products and don't face
the platform/marketplace fees, equating to illegal competition. Must be nice
to be a big player.

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

~~~
jvagner
This misconception, or common statement, will never go away. You'll have
occasion to post this sentence forever.

------
code4tee
At the end of the day WeWork is essentially a middle man. If the model catches
on landlords can make WeWork irrelevant by just adapting and offering “WeWork”
style coworking space thus it’s not clear what the end game of all this is. If
it fails it fails. If it succeeds it’s super easy to copy and cut them out of
the equation.

WeWork as a company is also becoming increasingly unfocused. They’re getting
into everything from schools, daycare and all sorts of other stuff. That’s
never a good sign. Do one thing and do it really well profitably. Anyone can
do a lot of cool stuff while burning investor cash like crazy.

~~~
a13n
I don't agree that landlords can easily replicate WeWork. First of all WeWork
has an incredible brand, and great processes/assets that let them run co-
working spaces more profitably.

Amazon seems like a counter point to your focus point too.

~~~
bobthepanda
Do they? What exactly does WeWork offer that a landlord couldn't easily
replicate? Amazon at least has the crazy logistics network.

To me, WeWork sounds more like a Moviepass type situation.

~~~
a13n
I think you're drastically underestimating how hard it is to start a co-
working space. Why would anyone want to work at your unheard of space instead
of WeWork? How are you possibly going to attract people at even half their
prices?

~~~
kgwgk
Why would anyone want to work at WeWork at twice the price?

~~~
a13n
Network of people working there, perks, quality, brand. Why do people do
anything for twice the price?

~~~
code4tee
People just want a nice place to work at a decent price. There is no brand
loyalty in this space. If someone has a nice product next door people will
move. Same as Uber vs Lyft. Nobody cares what logo is on the car.

------
rchaud
WeWork and Uber seem to be two examples of companies that "look" successful
purely on the basis of enormous amounts of VC subsidization. They lose
hundreds of millions each quarter because they're under pricing their service
to gain market share.

In order to get more funding rounds and ever-higher valuations, they're
promising pie-in-the-sky visions of WeWork daycare and schools, or Uber-
powered autonomous truck fleets. And when the water goes out of that tide,
they quietly announce very 20th century-sounding initiatives like property
brokering and sharing zip scooters and offering food delivery.

------
gumby
Learning: don't try to go completely vertical because it increases the number
of people who are threatened by you.

------
pl0x
WeWork is on their way to collapsing. The company is cult like with founders
who have a god complex. Softbank and Saudi funding have saved them from
collapse.

~~~
rorykoehler
When I was running a coworking space in Berlin back in the day WeWork were
just getting started. I went to NYC on a holiday and decided to contact all
the coworking spaces for networking purposes. Miguel McKelvey one of 2
cofounders of WeWork was the only person to get back to me. I found him
exceptionally humble and approachable. Not sure where you got your impressions
on the founders from?

~~~
SOLAR_FIELDS
Probably from this article that made the rounds a few months ago:
[https://www.propertyweek.com/insight/the-cult-of-
wework/5098...](https://www.propertyweek.com/insight/the-cult-of-
wework/5098454.article)

------
expertentipp
"Sharing economy" with local temporary monopolies and the intermediaries
giving everyone the short stick while aggresively reinvesting the transaction
money they keep hostage. Can we get over it already? I WANT TO OWN.

