A few weeks ago, following WeWork’s sale of ‘junk’ bonds, CB INSIGHTS published an in-depth article titled “What Big Real Estate Is Saying About WeWork”.
WeWork’s debt financing, which raised a total of $702 million, meant that the coworking giant “revealed a view into its internal finances, showing substantial growth in revenue, and potentially alarming growth in costs.” Yet, even though WeWork’s finances are on the negative side, CB INSIGHTS found that “WeWork is increasingly coming up in conversation among real estate incumbents on earnings calls.”
What’s interesting is that while some real estate companies view WeWork in a positive light, others “tip-toe around the company as a competitor, expressing reserved skepticism for the coworking model.” The coworking model can be successful, as has been proven by executive suites and business centers that have been around for a long time. WeWork’s specific fast-growth model has been a source of skepticism even among industry experts, especially as there is no way of knowing how it would turn out in an economic downturn.
Still, real estate companies view WeWork as a potential competitor, and for good reason. Last year, we saw some of the first property companies enter the flexible workspace industry. British Land launched its own coworking brand, Blackstone bought a majority stake in The Office Group, and real estate agent Savills also launched its own coworking brand.
Similarly, last year we also saw WeWork dive into the real estate industry by purchasing buildings. By purchasing real estate assets, WeWork is hoping to better protect itself should any downturn come around in the current economic cycle. For this reason, real estate companies have started to see WeWork as a potential competitor.
Yet, at the same time, some see it as a potential ally. WeWork didn’t only invest in real estate last year, they also dived into the world of management contracts by securing a management deal with IBM; much as Regus and others have been doing for years, if not decades.