On the National Front…
The Big Takeaway:
As coworking continues to grow, the nascent industry is still figuring out how to make money. WeWork is exploring optimizing space through data as a business model, a decision that may foreshadow the future of the coworking business model.
Like any good story, the history of coworking begins with its main character: WeWork.
Since WeWork sprung upon the scene in 2011 (R.I.P. Green Desk), the coworking trend has dominated commercial real estate headlines. The company made news again last week by launching a “future cities” initiative to “help address problems spurred by globalization, urbanization, and climate change.”
Valued at $47 billion and with offices described by The New York Times as the result of “a stock-photo set of every boutique-hotel lobby from Palm Springs to Stockholm to Milan,” WeWork seems to embody the physical fulfillment of the millennial American dream— a place where modern entrepreneurial spirit meets flexible workspace.
With over 60 coworking offices and 30,000 clients across 32 countries, it is safe to say that WeWork has become the standard bearer for coworking.
The question is, will this phenomenon last? And what is WeWork anyways?
WeWork: The Coworking Giant
WeWork was originally founded as a community for creators with a focus on startups and freelancers, but has grown into a virtual real estate behemoth in recent years.
Influenced by their jet-setting CEO Adam Neumann’s passions, the newly rebranded We Company (with its mission “to elevate the world’s consciousness”) is making a clear effort to expand beyond WeWork’s core business of subleasing office space.
Forays into co-living (WeLive), wave pools, elementary schools (WeGrow), urban design and big wave surfer Laird Hamilton’s superfood are all pieces of this rapidly expanding “WeEverything” puzzle. This lack of focus can be puzzling- until you take a closer look at the challenges and opportunities of the coworking business model, particularly regarding the volatile real estate market and the growing value of data.
WeWork & the Coworking Model
WeWork does not call itself a real estate company. It prefers to think of itself as a technology platform that creates communities.
This makes sense from a business standpoint. As WorkSuites’ CEO Flip Howard pointed out last week, “When the market turns down, do these corporations that are paying two or three more times for their office space in exchange for a cool environment and flexibility stay?”
It’s an important question and a potential issue that WeWork is actively seeking to avoid ahead of a potential recession.
Like all coworking companies, WeWork revolves around the provision, improvement and analysis of space. In its most basic sense, WeWork is a SaaS company— only instead of software, it offers Space as a Service.
This focus on space offers a unique set of challenges and opportunities: With its reliance on primarily short-term leases for revenue, WeWork is susceptible to taking a big financial hit if its corporate and entrepreneurially minded “members” decide to take their business elsewhere during economic downturns.
On the other hand, WeWork is able to collect valuable workplace data that can be used to track and optimize office space— a clear white space where “no one in the building industry has adequate information” according to WeWork’s Dave Fano. This data collection is not just limited to workspace- the aforementioned future cities initiative along with investments in schools, pools and food allow WeWork unparalleled insight into the modern work-life dynamic.
With its diverse acquisitions, WeWork is uniquely placed to collect and analyze data from a variety of sources to compile “the world’s largest data set on how people work and live.”
As WeWork diversifies its portfolio, its data sets become valuable not only through sheer volume, but also through the interconnected nature of work and our daily lives. As Bloomberg reported last week, a WeWork t-shirt slogan “says a lot about where the shared workspace business is headed: bldgs=data.”
Driven by its “Powered By We” data consultancy branch, WeWork recently ran pilot programs for corporate clients, “using the data gleaned to help them make decisions about redesign, building projects, and how to better manage existing offices.” Important data about occupancy, utility and efficiency is collected to better understand and serve building occupants— like “Google Analytics for space” according to Shiva Rajaraman, WeWork’s chief product officer.
After purchasing Teem, an analytics-driven conference room booking tool, and Euclid, a data platform that tracks employee identity and behavior, in the past year, it is clear that WeWork is further expanding its already considerable data collection and analysis capabilities.
In a time when data is commonly referred to as “the new oil,” it appears that WeWork is out to collect as much as it can.
Coworking rival Knotel is currently pursuing a similar path, involving the acquisition of proptech startup 42Floors and the debut of Baya, a blockchain-based listing service. As coworking continues to grow, it will be interesting to see if lesser-known competitors follow suit.
One thing is for certain- only time (and data) will tell if WeWork and its competitors are built to last.