WeWork opened “whimsical” co-working space in China in former opium factory
Read full story in the new issue of Money Of The Future 2016\2017 report
On 9th of February Shanghai studio Linehouse presented how they have transformed a former opium factory with green-painted metalwork and pastel-coloured terrazzo to create the Chinese flagship for co-working company WeWork. Located in Shanghai’s Jing’An district, the 5,500 square-metre WeWork Weihai hosts more than 1,300 members of WeWork, a co-working company that offers rented desk spaces at relatively low cost, with shared amenities for workers.
Local studio Linehouse overhauled the derelict 20th-century building to create a grand, hotel-like space that references its history as a store for opium, and then as an artist’s residence. “Linehouse celebrated the grandeur of the building, encapsulating the feeling of a grand hotel, transporting guests and members on an unexpected journey of whimsy, voyeurism and festivity.”
On the three levels, a new black metal handrail with black-stained chipboard balustrades wraps the triple-height atrium space, allowing guests to be spectators to the activities below. Two pantry areas on these floors are covered with hand-painted gold poppy printed wallpaper — a reference to the opium factory. The U-shaped brick building wraps a courtyard, which creates a three-storey atrium surrounded by the existing facade — now occupied by an open-plan workspace and bar. Wooden tables of various shapes furnish the space along with dark blue hardshell chairs. One the other side are larger tables for more collaborative working.
When arriving, members enter through an old laneway framed by a traditional Chinese arch with lights suspended above. The walls are painted pink and the concrete floor is tinted in a similar hue. The reception area is located between the existing and the extensions, so Linehouse clad the desk in heritage wood panelling but surrounded the base with concrete — a play with the in-between zone of the old and new. Behind the reception, a blue-painted cabinet of curiosities hosts a neon sign reading Ring For Service. The back bar, located within the heritage building, is furnished like “tropical retro-oriental parlour”.
Weihai Lu forms part of WeWork’s expansion into China, which it is undertaking in partnership with Sino-Ocean Group. The company has three spaces in Shanghai, with a fourth in the pipeline and another two set for completion in Beijing. WeWork’s spaces form part of the growing trend for co-working — flexible and communal workspaces — opening around the globe to cater to an increasingly self-employed workforce.
At the beginning of the year the $17 billion co-working startup leased space in Mumbai, and plans to expand to Bengaluru and New Delhi later this year. WeWork has officially entered the Indian market by leasing nearly 200,000 square feet of workspace in Mumbai. The company, which has been open about its Indian ambitions since last year, will launch a flagship building in India’s startup capital Bengaluru and New Delhi later this year. “If you are a member in New York building a global company and I don’t give you an Indian solution, I took away 10% of the world for you,” CEO Adam Neumann told.
WeWork’s Indian presence is a result of a partnership deal with Embassy, an Indian real estate company that will take care of negotiating leases and construction. WeWork will provide branding, office services, and culture that, among other things, includes beer-and-wine happy hours, and weekly bagel-and-mimosas networking events.
India’s startup boom in the last few years has led to a rise in the popularity of startups offering co-working spaces. Some offer office space to startup workers and freelancers for as little as Rs. 250 — about $4 — a day (and, presumably, no bagels). Last year, an Indian co-working startup called Innov8 was inducted in Silicon Valley-based startup accelerator Y Combinator’s summer batch. Y Combinator invested $120,000 for a seven percent equity stake in the company, making it the accelerator’s first ever investment in a co-working startup.
Also the co-working startup plans to open a space in Buenos Aires in May, with more expected in Rio de Janeiro and elsewhere. WeWork plans to open two locations in Sao Paulo in June, as well as at least one in Rio de Janeiro by the end of the year. Latin America remains a mostly untapped market for WeWork. The company opened two buildings in Mexico City last year and has a third slated for April. WeWork is also looking at buildings in Lima and Bogota. “There’s a lot of business being done throughout Latin America”. “If you’re from Colombia, you want to grow in Brazil and Peru.”
WeWork is coming late to Brazil, where shared workspaces have already spread. The country’s co-working market, which includes many local players, grew 50 percent in 2016 to 400 spaces, according to real estate consultant Engebanc. The region’s weak economy is lowering demand for commercial real estate leases. About 23 percent of Sao Paulo’s 5 million square meters (16 million square miles) of office space is empty, according to the most recent Engebanc study. In Rio de Janeiro, which faces an oil and gas crisis, about 27 percent of the 2.7 million square meters of available office space is vacant.
In Mexico City, WeWork’s business performed better than expected, which inspired it to look for a third building in the city. Even larger companies are interested: Bacardi rents about 100 desks in one of the Mexico City offices and has plans to build a Bacardi-sponsored bar on the building’s rooftop, WeWork said.
Brazilian landlords are interested in bringing on co-working spaces as tenants for their so-called Class B properties, which are often family owned and conveniently located but lack the amenities that high-end tenants demand. “This is happening quite often, especially close to subway stations,” said Daniel Iannicelli, a director at Engebanc.
WeWork would invest 250 million pesos (approximately US$15 million) for the new office. The office will be spread across 12,000 square meters and will have 2,000 desks available to rent. “With sweeping views of the city and space for teams up to 100 people, it will be a cornerstone in a dynamic neighborhood where Argentines can work, live, shop, and be inspired,” Pato Fuks , CEO of WeWork, has written in his blog.
Also WeWork will become a key anchor tenant at 333 George Street, Sydney, which is owned by the Charter Hall Group’s Prime Office Fund. The lease takes the building’s committed space to 100 per cent after practical completion in December. It comes as the Sydney office leasing market is busy with the highest net effective rental growth of 5 per cent in the closing months of last year and expectations of improvements this year.
The 4300 sq m WeWork lease is across five floors comprising the outdoor terraces and extends the group’s footprint in Sydney’s Martin Place precinct as the construction of the light rail along George Street, the planned Sydney Metro line and upgrades to Martin Place make it the commercial heart of Sydney’s CBD. CPOF fund manager Craig Newman said the fund was “pleased to welcome WeWork to 333 George and we are excited about the community dynamic that their co-working environment will deliver for our other new tenant customers and anyone seeking work space in Sydney’s CBD”. WeWork’s head of real estate, Asia-Pacific, Evan Kleinberg said: “WeWork 333 George Street will add to our vibrant and growing community in Sydney and more specifically Martin Place. WeWork members will benefit from this location’s central locale, ease of access, and strong amenities.”
By the end of 2016, WeWork has set up more than 100 locations at 35 cities in 10 countries, and now nearly 10,000 companies are based at a WeWork location, with member companies ranging from start-ups to household names including Delta, IBM, KPMG, GE, Dropbox and Samsung. This creates a powerful community that other operators do not offer.
“Do What You Love” is Adam Neumann’s catchphrase and no-one who has visited a location of WeWork can fail to be impressed by the bon mot that can be found just about everywhere in the company’s public spaces to inspire the start-up entrepreneurs, freelancers and self-employed professionals who gather there to work. Neumann, WeWork’s co-founder and CEO, and a Isreali navy veteran, is passionate about his vision for a global community of creators－for building WeWork not just as a place for people to work in at affordable rental cost, but as a way of working and living. (Another Israeli startup has raised $15 million in January for its boutique coworking spaces to help it take on WeWork. Mindspace, an Israeli company that creates boutique coworking spaces for startups and corporates, has raised $15 million (£12 million) from private investors to help it expand to the US and further across Europe. Founded in 2014, the WeWork rival has already opened four creative coworking spaces across Europe and Israel. The company has spaces in Berlin and Hamburg, as well as two in Tel Aviv.)
With the belief that the world is a better place because of “creators”－and a desire to understand the demands of those creators－Neumann and his team have turned WeWork, that began in 2010 as a small platform for co-working spaces with just one location, into a unicorn enterprise with a value exceeding $17 billion.
In China’s context, the thinking behind “Do What You Love” is in alignment with the country’s nationwide campaign of innovation and growing entrepreneurship, said Neumann. This has helped power WeWork’s rapid expansion in the market. In return, the co-working space operator helps improve productivity and empowers start-up entrepreneurs to reach further heights, he added.
“We will open several locations in China. In Shanghai, we will open locations in Yunan Lu, East Ocean Center (Yan’an Donglu) and Huaihai Zhong Lu very soon. In Beijing, WeWork Guanghua Lu is going to be opening in March and another location in the city will be opening by summer 2017. Currently WeWork has two locations on the Chinese mainland, namely WeWork Yanping Lu and WeWork Weihailu. Both are located in Shanghai.”
“China’s fast growth of startups, and nationwide encouragement of innovation and entrepreneurship, is a great opportunity for startups. There is so much demand yet to be met, and these are great opportunities for innovation. Of course, for WeWork it is also a great opportunity to grow in the world’s second biggest economy.”
“WeWork’s member demographics are changing as co-working networks expand. In fact－besides conventional startup entrepreneurs－freelancers and self-employed professionals, small businesses, artists, and divisions of large corporations have now joined the co-working network. For example in Hong Kong, a division from HSBC is working in a WeWork location, as the employer believes that in an open, interactive environment, staff are more encouraged to be innovative and creative, which helps them to perform better and work with more well-being.”
“The value-added services the community WeWork creates make WeWork far more than just a sublet cubicle at lower cost. At WeWork, members are part of a global network of all the people who share resources on the same platform, which provides opportunities for letting everyone know everyone to seek collaboration opportunities. More than 70 percent of WeWork’s 90,000 members collaborate with each other and our international locations serve as convenient bases for business travel, enabling a great degree of work flexibility for both multinationals and small－to medium-size businesses alike, as well as options for easy expansion into new markets.”
“Take the Beijing Guanghualu location for example. It is the first location WeWork will run in partnership with China local real estate partner Sino Ocean Group, based on a strategic cooperation agreement with a revenue share component between WeWork and SOG reached in November. Each brings unique expertise and assets to the partnership: WeWork provides the brand, design, community, digital tools, global member network, and management operations. SOG provides the real estate, local market expertise and building-level capital. The partnership is the first of its kind for WeWork in China.”
«In new locations, facilities such as a yoga room and fitness room are added alongside a nursery room and shower room, giving members comfortable spaces to relax, entertain, and have quality time with children and family.»
In October 2016 investors including Shanghai Jin Jiang International Hotels have put another $260 million in shared-office-space startup WeWork Cos. capping off a funding round that values the company at $16.9 billion. The deal brings WeWork’s latest funding round to $690 million. The company completed a $430 million chunk of the funding in March. WeWork has now raised roughly $1.7 billion in private capital. The latest round, which included a U.S. family office and a mix of new and existing investors, will be used to fund the company’s international expansion, especially to Asia.
Shanghai Jin Jiang’s investment comes as WeWork makes a big push to bring its communal office spaces to Asia. The company opened a Shanghai office, its first in China, in July. It has also expanded to South Korea and Hong Kong and plans to open locations in other part of Asia. Shanghai Jin Jiang owns or manages more than 6,000 hotels in 60 countries. Like other Chinese state-owned enterprise, it has been on an acquisition spree both within the country and abroad. The hotelier last year purchased France’s Louvre Hotels Group, the second-largest European hotel group for roughly $1.4 billion.
And on 30th of January SoftBank Group Corp. announced an investment of well over $1 billion in shared-office space company WeWork Cos., in what could be among the first deals from its new $100 billion technology fund.
SoftBank previously has discussed an investment in WeWork before pulling out, two people familiar with the discussions said, and talks may not lead to a deal this time. Some SoftBank executives have questioned whether WeWork is already overvalued, and a company in the business of office space is far afield from tech-focused investments. Any investment in WeWork or other companies wouldn’t happen until the SoftBank fund is finalized, which is expected in mid-to-late-February, according to people familiar with the matter.
The planned SoftBank fund — a private-equity style vehicle known as the Vision Fund — is greatly anticipated among cash-hungry technology companies, many of which have relied on a succession of deep-pocketed investors to put off initial public offerings. SoftBank plans to invest about $20 billion a year, expected to go toward both private-company investments and public companies that could be taken private.
SoftBank, one of technology’s most ambitious investors, said last fall it would manage the $100 billion SoftBank Vision Fund and contribute $25 billion to it. A Saudi sovereign-wealth fund is expected to invest $45 billion in the fund, with the remainder coming from investors including Apple Inc., Qualcomm Inc., Foxconn Technology Group Ltd. and the family office of Oracle Corp. Chairman Larry Ellison.
SoftBank is expected to shift quickly into investment mode after the Vision Fund closes, people familiar with its plans said. In December, SoftBank itself plowed $1 billion into satellite-internet startup OneWeb Ltd., an investment that is expected to be transferred to the Vision Fund, according to a person familiar with the matter.
While WeWork isn’t a tech company, some of its backers view it as the future of office space and a way to get in on the growing startup economy. WeWork said it had more than 85,000 members renting everything from a shared desk to entire floors of space at the end of 2016, up from around 45,000 at the end of 2015. If an investment were to happen, it would likely push back any public offering for WeWork — which had been considering a 2017 IPO — until at least 2018, these people said. It could give the company additional time to show demand for its office space extends well beyond startups.
An investment in WeWork also carries many risks. It is an industry with few barriers to entry, and its fortunes are closely tied to the health of the startup market. Its general business model is to sign long-term leases with landlords, but take short-term rents from its own tenants, meaning that revenue is volatile and losses could pile up in a recession. WeWork also has missed some internal targets. Last year, the company acknowledged revenue growth was slower than it had hoped, and it has throttled back plans for WeLive, a division that focuses on dormlike apartments that was once targeted for very rapid growth.
In April 2016 WeWork launched WeLive, a residential rental building that offers flexible renting and a nicely packaged set of amenities. The new program launched for New York (at 110 Wall Street), the same building where WeWork has its main space in the Financial District, as well as DC, a 2221 S. Clark Street in Arlington.
The spaces have studios, 1BR, 2BR, 3BR, and 4BR spaces, serving up to eight people, and the studios can come in single bed apartments or two beds to split up the space between roommates. But what’s more interesting is that folks can rent however they want, with the freedom of a month-to-month agreement.
The least expensive deal was a shared Studio Plus apartment, that comes with two beds, and starts at $1375/month, that includes furniture, bedding, and kitchenware. For an extra $150, users will have access to a full set of amenities, including monthly cleaning, high-speed internet and Verizon cable.
WeWork is positioning this as an easy way to move to New York (like as a startup) and get going without all the extra costs of moving, buying furniture and kitchenware, and getting utility bills set up. Plus, the WeLive space will also have community events like a Happy Hour, Karaoke sessions, etc., all of which can be investigated on the WeLive app. Given that, at least the NYC location, the WeLive space is in the same building as WeWork, it’s easy to see how this could be a convenient living option for a NY startup.
However, the WeLive space could also be attractive to people just graduating from NYC universities and looking for a job, or people who are losing their lease but haven’t chosen a more permanent settlement yet. And with the long list of amenities included in the deal, it would be easy to see people staying far longer than they expected.
The idea is that for a bit of a premium in price, you can live month to month in a shared space, forgoing signing on to a long-term lease commitment, while reaping the benefits of more hotel or hostel-like perks: housekeeping, yoga, and free beer.
Just as businesses using WeWork rent out a small bit of their own space in a communal office setting, WeLive apartment renters can have a semiprivate or private area for sleeping, surrounded by more open, shared spaces, giving the places a kind of post-college dorm vibe. The apartments are also fully furnished, staffed with a concierge, and offer bottomless coffee and beer. And because this is a startup, there’s also an app that connects the WeLive dwellers to request services or plan activities with other WeLive guests.
In September 2016 WeWork announced that the company will take the entirety of a planned office and residential tower being developed by Martin Selig Real Estate to bring its new WeLive co-living residential program to the Belltown neighborhood, Seattle. The co-working venture will occupy 200,000 square feet of office space in Selig’s 36-story Third & Lenora tower, and 384 apartments above will be WeLive units.
Guests in the furnished apartment spaces can rent for a day, a week, a month or a year. The apartments range in size from studios to three-bedroom units. The residential program’s slogan: “Love your life.”
WeWork currently operates co-working spaces at three locations in Seattle: The original location in South Lake Union, as well as newer spaces in the Holyoke Building and Westlake Tower in downtown Seattle.
In December 2016 Konrad Putzier wrote: “Starting January , beds at WeWork’s Wall Street co-living space will get a lot more expensive. WeLive studio apartments will rent for $3,050 per month (up from a current $2,000) and 4-bedroom pads will go for $10,000 (up from around $6,000) after the company’s discounted beta pricing expires, according to an email sent to residents over the summer.”
“We’re incredibly pleased with the performance of WeLive,” a WeWork spokesperson told. “The test period for the building is coming to an end; the pricing now reflects market rates.” The company claims that the building’s occupancy rate is in the high 90s. Two-bedroom apartments will now go for between $5,400 and $6,400 per month and three-bedroom pads for $7,350, the email states.
WeLive allowed before its earliest occupants to move in under a “friends and family” arrangement that discounted rents by 15% to 20%, making a studio as cheap as $2,240. Such deals persisted for several first months, but they became less generous as rooms filled. Over the summer 2016, WeLive lowered its discount on studios to 10%, or $2,520, and offered it only to people who agreed to stay for a year or more. By November, the company said options for a discount were “limited,” with almost all incoming studio residents paying $2,800 a month. Rents for other units have also increased to match the prices WeLive advertises. Four-bedroom apartments that cost about $6,000 a month for early occupants now start at $8,000. At $3,050 a month, WeLive’s studios are now priced slightly above market; the median rent for a comparably sized unit in downtown Manhattan, which includes Wall Street, was $2,800 as of November 2016, according to data from real estate firm Douglas Elliman. But a premium for amenities and the lack of a long-term lease is justifiable. WeWork said WeLive tenants on existing contracts with subsidized room rates will continue to receive their discounts.
But the business has faltered in other respects. WeLive opened only two locations this year — the second is in Crystal City, Virginia — despite having told investors in 2014 that it would have 14 co-living residences up and running by the end of 2016.
WeLive’s effort to strike subsidies from its rents comes as many startups are attempting a similar maneuver: weaning customers off discounts that made their services more palatable. The process has proved difficult for companies that leaned especially heavily on investor-funded subsidies to build a following and disguise the true costs of their business. Uber and two of its overseas competitors, Ola and Didi Chuxing, have rankled customers by hiking fares as they try to bring cash burn under control. ClassPass, a fitness startup, disappointed fans in November 2016 by retiring its popular “unlimited” plan. Postmates, a startup that makes on-demand deliveries, has angered users with high fees and misleading pricing.
Read full story in the new issue of Money Of The Future 2016\2017 report