It has been a long cherished dream to figure out a way to bet against this one, links below.What you have here is a real estate company trying to justify a tech company valuation.
First up, a quick hit from The Information:
WeWork, which built its business on luring freelancers and startups with no-strings-attached office space, may now be looking to protect itself against drops in demand by going after bigger tenants that commit to longer stays. The company has begun pushing to lock some companies into year-long rental agreements rather than month-to-month.And from the Wall Street Journal:
The New York-based company has started offering year-long membership agreements as an option for companies looking to lease space at four soon-to-open buildings in Manhattan, said spokesperson Dominic McMullan. Those companies would get “small discounts to the regular price” of leasing space.
The move comes amid reports that WeWork has struggled to meet financial projections.
WeWork to Big Companies: Work With Us
Office-sharing firm is courting corporations, betting they will trade suburban office parks and commercial towers for its hip, urban workspaces
WeWork Cos. shot to a $16 billion valuation by luring an emerging class of entrepreneurs and freelancers into shared office spaces that are anything but corporate, replete with couches for workday sprawling and free beer on tap.Previously:
Now, it is courting big corporations, betting that firms will trade suburban office parks and bland commercial towers for its hip, urban workspaces. General Electric, KPMG LLP and Cognizant Technology Solutions Corp. already house some employees in WeWork offices around the globe, and the 90-location WeWork is making a concentrated push to both land more corporate customers and spur existing ones to take on more space.
A 10-person sales team is out pitching companies and chasing leads, and WeWork recently posted a job for a head of enterprise sales to grow membership among Fortune 1000 companies.
Central to WeWork’s pitch is the idea that cool workspaces help woo young talent and inject energy into the office. Artie Minson, WeWork’s president and chief financial officer, calls it “a lifestyle brand around working.”
Member fees vary by location, but enterprise members pay a discounted rate in exchange for volume and length of lease. In one Manhattan WeWork, a private office with seats for eight currently costs $6,250 a month.
WeWork won’t disclose the scale of its enterprise plans, but says about 10% of Fortune 500 companies already rent space in its locations, and firms with 15 or more people comprise its fastest-growing customer base. Sixteen WeWork members have more than 100 desks, according to the company.
Large companies’ appetite for startup-style working is unclear, however. So far GE, Cognizant and other corporate WeWork users have kept their presence small, with a fraction of employees working from there regularly.
WeWork’s pitch is a tricky one, as companies coveting a dose of coolness also might be wary of outsourcing their company culture. Mr. Minson stresses that shared offices “enhance” existing culture, but don’t replace it.
Signing long-term deals with deep-pocketed employers could help WeWork continue its growth and justify its valuation. In the last year so the company has fallen behind on projections for several business lines, lowered rents in a handful of locations. It also fired 7% of employees.
“They’re probably looking at their growth plans and realizing that…they’re going to need to tap into a broader demand pool,” said Jed Reagan, a senior analyst at Green Street Advisors covering office companies.
“There may be limits to how many seats you can fill with just sort of entrepreneurs and independent contractors and startup types,” he added.
With about 200 desks in WeWork locations in four cities, Silicon Valley Bank is among the company’s biggest enterprise clients.
Having offices in WeWork locations builds trust with startup clients and has facilitated some business deals, said Mark Gallagher, a senior market manager for the bank.
Young recruits also prefer WeWork to the bank’s suburban offices in locations such as Newton, Mass., though most of the bank’s 2,188 employees still clock into the old offices....MORE
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