
Critics say WeWork is an overvalued real-estate play - petethomas
https://www.wsj.com/articles/wework-a-20-billion-startup-fueled-by-silicon-valley-pixie-dust-1508424483
======
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.

~~~
kafkaesq
Of course self-leased speace is generally (way) better - _if_ you can _find_
it (at the capacity you need _right now_ ) and hire people to run it for you.
WeWork's entire model relies on the fact that, while not it's not the
swankest, most productivity-enhancing working spaces you've ever been in (far
from it) -- it is available pretty much _on tap_ , in at least some capacity,
in key cities.

Remember all those outright shitholes many companies used to work in (in their
bootstrap phases) at least? Or this whole "borrowing office space from a
friend, until..." thing? Or, until not too long ago, literally using
_coffeeshops_ or restaurants as meeting rooms? WeWork seems to have succeeded
in making _that_ culture pretty much go away, at least.

~~~
pcsanwald
exactly. Finding less than a 5 year lease in Manhattan is extremely
challenging in my experience.

~~~
jakemoshenko
They will almost always allow you to sublease though, which is its own
horrible time sink to find a replacement tenant.

~~~
pcsanwald
sure, I've subleased a bunch. my experience with that is that two kinds of
companies generally sublease: places that are growing and will eventually want
the space you're occupying for themselves, or places that aren't doing well
and will eventually fold. I've subleased from both :).

it's for sure a good option if you want a very short term thing, but it's a
tough spot when you probably want > 1 year but 5 is a stretch.

------
j4p3
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 enterprise services.

It hasn't fulfilled that promise yet, not even close, but it's not an
unreasonable proposition. Is it possible to capture a big, fragmented market
with kitschy decor? Will the services marketplace be as fruitful as it thinks?
These would be interesting questions to explore.

~~~
sillysaurus3
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 up your neighbors and meet some
interesting people. Chance encounters like that are rare at a traditional
office. People also throw events on the upper floors all the time, which gets
you free lunch at a minimum.

The above experience costs $2,200/mo to get you an office with plenty of room
for four people.

I don't know. I hope they never go out of business. It's the best environment
I've ever been in.

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

When you have the option to go work someplace with a door that shuts, it
removes all the stress of not having it, even if you never actually use it.

~~~
tptacek
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 all of them? --- they're overstaffed. They're premium-
everything (I wanted the couches from the first floor at WeWork West Loop and
asked where they got them; they were custom-designed!). Free beer on every
floor (this turns out not to be a win, but it's still part of their cost
basis). Most importantly: they site these things in marquee locations that
they have to be paying a mint to lease.

I'm happy to take full advantage of the largesse of Investor Storytime
Economics, but unless you're Amazon, the music has to stop playing at some
point. WeWork is not Amazon.

~~~
Alex3917
Beer aside, every WeWork I've ever been in seems to have dozens of fridges
stocked to the brim with rancid milk. It's weird that they have custom
furniture but can't even get their shit together on the most basic issues.

~~~
cotterphinney
THANK YOU. At first I was very confused as to why there were so many half-full
milk jars in the fridge but it soon made sense. I don't think this is WeWork's
"fault" in that Ronnybrook milk only seems to last about two hours after
opening, but they should really buy another brand.

~~~
Alex3917
It's not just the opened ones. Every time I go into a WeWork I usually end up
opening several things of milk to see if there are any that haven't gone bad,
and there almost never are. It's like they're turning off the refrigerators at
night or something.

It's literally been a problem for several years. The company even acknowledged
the problem on Twitter at one point, but didn't bother fixing it.[1] It
shouldn't be that complicated to provide non-rancid milk for the coffee. Even
in my home fridge milk lasts two weeks after being opened, and that's several
degrees warmer than it would be if milk were the only thing being stored in
it.

[1]
[https://twitter.com/i/web/status/840264145467518978](https://twitter.com/i/web/status/840264145467518978)

~~~
SOLAR_FIELDS
A bit of deflection on part of the company too. "it sounds like this is an
ongoing issue for __you __"

------
neaden
"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.

~~~
eddieplan9
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.

~~~
nugget
I went to WeWork just because I needed a few month-to-month desks quickly.
WeWork has excellent execution but I don't think of them as a lifestyle or
luxury brand. If someone else can provide me the same ballpark product for 20%
less then I would likely switch. There's a lot of room for competitors to move
into the market.

~~~
madaxe_again
It's called working from home, and it's a lot more than 20% less.

~~~
eyko
Not if you regularly have clients come around for meetings or colleagues for a
chat. WeWork provides a good enough atmosphere to work and socialise with work
related people (it's not just the desk you're paying for).

~~~
lloyd-christmas
Half my business comes from other companies in the wework network. I also
regularly contract out work to people in the network.

~~~
madaxe_again
So you're saying you've built a business 50% dependent on someone else's
business. That's fragile.

~~~
linkregister
You think the entire B2B business model is fragile?

Only consumer-facing companies are resilient enough for you?

~~~
BillinghamJ
Relying on a single client/company for 50% of your revenue puts you in an
extremely fragile position. Very common reason for failure in B2B companies -
relying on a single big fish which will make or break the company.

~~~
lloyd-christmas
But that isn't what I said. I said I get 50% of my clients from the network,
not that I need the network to get 50% of my clients. They are drastically
different things. It's client acquisition cost. Why pay to go apple picking
when I have an orchard in my back yard?

------
dmode
WeWork needs to go prove itself by surviving the next downturn. I believe most
of WeWork's customers are other startups who valuations are fueled by large
rounds of VC investment. This capital tends to dry out during a downturn,
however WeWork will still be saddled with long term leases during this period.
I wonder what their strategy is to ride out a period of low capital raise for
startups.

~~~
sarreph
This will indeed be very interesting to watch out for. Speaking from
experience, WeWork has a high turnover rate — VC-money-hungry startups line
the hallways, coming and going accordingly. I don't think the established,
boutique firms and agencies constitute a large enough chunk of their business
to support them in a recession.

Their rent is just too high to capture the frugal companies who'll be the
survivors of a poor market; lowering prices might save them, but I don't know
how well their model accounts for this.

------
Moseman23
The main difference is not amenities or marketing but the fact that a large
percentage of WeWork's customers (my company included) are paying rent with VC
money. Up to 90% of their customers will go out of business. Not a super
stable customer base.

~~~
abhinavkulkarni
The companies will keep coming and going. As long as there is a steady stream
of startups being funded in SV, WeWork should do fine. In fact, they make it
much easier for the startups to bootstrap and focus on their business problem,
rather than worrying about the logistics.

~~~
lloyd-christmas
Ready to have your mind blown? _SV is not the only place where businesses
exist._ WeWork has 14 locations in the SF area and 44 locations in NYC. I work
in one in NYC, and I bet only a handful of the businesses in the building are
VC funded. They'll do just fine because tech isn't their only source of
income.

------
aaroninsf
No asset valuation bubble driven by years of cheap money and privately held
closed books, folks! This time it's different...

If you've lived in the area or industry more than 10 years, you know how this
story ends, especially regionally where real estate commercial and otherwise
is in a cojoined overvaluation.

EDIT: next in my browse list, today...

[https://techcrunch.com/2017/10/18/blue-apron-is-laying-
off-6...](https://techcrunch.com/2017/10/18/blue-apron-is-laying-off-6-of-its-
staff/)

[https://www.theatlantic.com/technology/archive/2017/10/stock...](https://www.theatlantic.com/technology/archive/2017/10/stockton_ubi_basic_income/543036/)

etc...

When tech crashes, the soft recovery is going to a lot uglier to a lot more
people...

------
rawrmaan
WeWork's achilles heel IMO is that they disincentivize non-VC funded companies
from staying for more than a year due to their 70% first-year rent discount.
We at Habitat are moving out of the WeWork Philly office after just a year
because of this. It's just too expensive to stay.

------
Brendinooo
What are people looking for in a coworking space? What does your space provide
you beyond a desk, Wi-Fi, and coffee?

Whenever I've researched spaces nearby, I've treated proximity, price, and
hours as the three biggest selling points for a small business, work-from-home
type like myself. But I guess that's only a small segment of the overall
market.

I guess if you're a bigger business maybe you'd get comfortable with a brand
name - WeWork in SF should be roughly similar to WeWork in NYC, and they
already have your credit card on file.

~~~
kimsk112
Another thing is lease flexibility as well as multiple locations. Our company
has different teams at multiple WeWork locations. We have to travel to
different locations sometime, and be able to just walk 24/7 into WeWork space
which mostly located in the city with good public transport is very
convenient. Conference room, mail handling, coffee, beer and other things help
too.

------
fossuser
A little off topic, but I think it'd be cool if you could pay someone (a hotel
chain? Airbnb?) a monthly 'rent' to live in any of their locations. The
locations are guaranteed to have highspeed internet and some easy standardized
way to move between them.

This would be really cool for remote work since you could live everywhere and
nowhere without having the overhead of having to do all the planning yourself.

~~~
pram
WeWork actually has this, believe it or not.

[https://www.welive.com/](https://www.welive.com/)

~~~
nwah1
For some reason, this strikes me as creepy. Like joining some sort of
corporate cult, where you get to live inside an office 24/7.

~~~
DonHopkins
It's alive!!!

[https://www.youtube.com/watch?v=QuoKNZjr8_U](https://www.youtube.com/watch?v=QuoKNZjr8_U)

------
JamesAdir
Selling $100M of shares sums up the entire story. No matter how WeWork will
end, the founder has done his exit + salary in all the years. The last
investor will be the one to pay the bills - probably the public via an IPO.

------
G2kyd7
The advantage of the WeWork system is the convenience of quickly getting
office space on a monthly-basis without dealing with internet for as well for
example. What I have noticed that they do not cater to remote workers small
start ups any longer, instead they are renting out whole floors to fortune 500
companies. I agree with others, the meeting room system is a rip-off, which is
why no one is using it and people are simply squatting in those rooms.

Overall it works for me after 2 years in three different locations, there are
certainly a few issues: \- cooling (Miami) is either way too cold or not
working at all and often comes with deafening noise \- their employees are
often not trained well enough, presumably due to rapid expansion \- coffee is
absolutely awful (maybe acceptable for American standards) \- annoying tech
bros sponsored by their parents \- events that are geared towards the above
(beer pong, really?) \- getting spammed by people who think networking means
sending everyone unsolicited messages offering their services \- noise from
people who apparently don't have to work and aggregate in the hallways instead

------
EGreg
I think WeWork is great. But I think commutes are a time suck. How about the
new trend of Officeless (TM) companies, connecting entirely online, working
asynchronously and taking breaks to go to the beach and socialize with friends
instead of random people.

Your talent pool can suddenly come from all over the world, and costs cheaper
while making employees happier.

~~~
bobbles
Only really works if all of your friends work in the same environment though
right

~~~
EGreg
They can work in other fields.

------
NN88
This article lays out a company thats a parody of every stereotype known to
man.

Jesus.

------
NN88
> _A decade ago, Mr. Neumann was a small-time entrepreneur in his 20s living
> with his sister, a model, in her Tribeca apartment. Mr. Neumann, who was
> raised on a kibbutz in Israel, was struggling with his first startup
> idea—women’s shoes with collapsible heels—which failed to take off. His next
> venture was baby clothes with knee pads called Krawlers._

Who didn't see this coming?

------
hedora
Trump’s recent attempt to torpedo obamacare by allowing multi-company group
plans seems like an opportunity here.

WeWork should offer a group plan to tenants. It creates lockin, and most
tenants are young+healthy, so this would be a great deal all around (cheap
premiums, low barrier to entry for older workers).

------
NN88
Paywall:

[http://archive.is/Fb1D4](http://archive.is/Fb1D4)

------
Mankhool
Paywall . . .

~~~
gnicholas
Can access via social media (just do a search on twitter for the article) or
via the Read Across The Aisle app/Chrome extension, which is free and includes
a free pass to the WSJ (disclosure: I am the founder).

~~~
greatartiste
I did that and am trying to access via Twitter but just hit the same paywall.

~~~
kornish
Could be a browser cache thing. Try accessing from Twitter in incognito.

