Shared WeWork space is good business
After 10 years of building, company concept still growing
NEW YORK — On a cold February morning at the Brooklyn Navy Yard, the skeleton of a modern 15-story building was rising from a muddy construction site along the East River. As long and as tall as a cruise ship, the sleek glass structure loomed above rusty, century-old dry docks, serving notice to the industrial neighbourhood that the new economy was coming.
The project, known as Dock 72, is the brainchild of WeWork, the fast-growing New York-based business co-founded by an Israeli that is now valued at $20 billion. In just eight years, WeWork has built a network of 212 shared working spaces around the globe. But WeWork’s chief executive and co-founder, Adam Neumann, isn’t content to just lease out communal offices. Neumann — a lanky, longhaired 38-year-old — wants nothing less than to radically transform the way we work, live and play.
When Dock 72 is completed this year, if the aggressive timeline holds, it will represent the fullest expression of Neumann’s expansive vision to date. There will be an enormous co-working space, a luxury spa and large offices, for other companies like IBM and Verizon, that are designed and run by WeWork. There will be a juice bar, a real bar, a gym with a boxing studio, an outdoor basketball court and panoramic vistas of Manhattan. There will be restaurants and maybe even dry cleaning services and a barbershop.
It will be the kind of place you never have to leave until you need to go to sleep — and if Neumann has his way, you’ll sleep at one of the apartments he is renting nearby.
It’s an all-encompassing sort of ambition, and Neumann is the brash and idealistic pitchman. Simply by encouraging strangers to share a beer at the office, he argues, WeWork can heal our fractured society.
“How do you change the world?” Neumann asked in a recent interview. “Bring people together. Where is the easiest big place to bring people together? In the work environment.”
It may sound simplistic, but around the globe, companies are buying whatever it is that Neumann and his co-founder, Miguel McKelvey, are selling. WeWork has rapidly expanded to 20 countries — it offers work spaces in Toronto, Montreal and Vancouver — assembled a formidable executive team and attracted some 200,000 members. Big companies like JPMorgan Chase and Siemens are signing on as tenants, and revenues are growing fast, expected to top $2.3 billion this year.
WeWork last year bought the iconic Lord & Taylor building on Fifth Avenue in Manhattan, which is being transformed into the company’s new headquarters. That purchase from Canada’s Hudson’s Bay Co. was made possible in part by a recent $4.4 billion investment from Softbank, the Japanese technology group led by the enigmatic billionaire Masayoshi Son.
Already the company has started WeLive, its residential offering, and Rise, its gym. It acquired Meetup, a social network that facilitates in-person gatherings, and the Flatiron School, a coding academy. Still to come: WeGrow, the company’s for-profit elementary school, set to open in September. WeWork has even invested in plans to create giant wave pools for inland surfing.
A company ostensibly about co-working now employs yoga instructors, architects, teachers, environmental scientists, software engineers, molecular biologists and social psychologists.
Is it all a bit much for a young company still trying to build out its core business? “I’ve made that argument,” said Bruce Dunlevie, a WeWork board member and partner at the venture capital firm Benchmark. But, he said, “great entrepreneurs like Adam don’t listen to guys like me.”
As WeWork expands in all directions, it faces persistent questions about its rich valuation and the durability of its business model. Critics argue that the company does little more than corporate real estate arbitrage — leasing a space, spiffing it up, then subleasing it to other tenants. The company owns hardly any properties, giving it precious few hard assets. Its growth projections strike many as unattainable, and it has missed expectations before. A number of upstarts loom as potential competitors, seeking to replicate WeWork’s success. And many WeWork tenants are unproven startups that could quickly fold.
IWG, a publicly traded coworking company that has more members and more real estate than WeWork, is valued at $2 billion. Yet Neumann has convinced investors that WeWork is worth 10 times that figure.
To assess WeWork by conventional metrics is to miss the point, according to Neumann. WeWork isn’t really a real estate company. It’s a state of consciousness, he argues, a generation of interconnected emotionally intelligent entrepreneurs. And Neumann, with his combination of inspiration and chutzpah, wants to transform not just the way we work and live but the very world we live in.
It’s an audacious, perhaps delusional plan for a company that made its mark by building communal desks and providing refreshments. So far, it seems to be working.
Son, WeWork’s largest investor, is betting that the company will grow exponentially in the years to come, making his multibillion-dollar investment a veritable bargain.
“Make it 10 times bigger than your original plan,” Son told Forbes late last year. “If you think in that manner, the valuation is cheap. It can be worth a few hundred billion dollars.”
WeWork didn’t invent co-working spaces, of course. IWG, better known as Regus, has been around for decades. But Neumann and McKelvey quickly hit upon a recipe that drew throngs of startups: an industrial chic aesthetic, some big common areas with comfy couches, free beer and piped-in pop music.
Individuals pay as little as $45 a month for occasional access to a desk in a common area. Startups can pay a few thousand dollars for a private room on a month-tomonth basis, and some big companies pay millions of dollars a year for spaces that hold thousands of employees over multiple locations.
It’s a formula that has caught on from New York to Tel Aviv to Shanghai. In New York alone, WeWork has 49 spaces, most of them nearly full.
But for WeWork to really succeed in changing the way we all work, it is going to have to win over big corporations seeking space for thousands of employees. The strategy is an odd reversal for WeWork, which made its name catering to freelancers and startups.
Although Neumann’s unbridled zeal can be abrasive to some, it could also be viewed as the mark of a peripatetic savant. Walter Isaacson, the biographer of Steve Jobs, Albert Einstein, Benjamin Franklin and Leonardo da Vinci, counts Neumann as a friend and said he shared some of the attributes that had allowed those other titans to succeed.
“He has an instinctive feel for how millennials are going to want to have community work experiences without joining large corporations,” Isaacson said. “And like Steve Jobs and other great entrepreneurs, he knows how to connect the humanities with business.”