If you have been to WeWork’s branch in Singapore, you would be amazed by how stuffed it was – full of events people, drinks, and (of course) the newly renovated design in modern Asian style.
Situated on Beach Road, the co-working space is WeWork’s 200th branch globally, as well as the 1st in Singapore that just launched last year. As we have discussed in the previous article, the American co-working space giant entered Southeast Asia after acquiring Singapore’s local operator, SpaceMob in 2017. Its $20 billion evaluation has also made WeWork one of the world’s 10 most valuable startups.
Despite Singapore is not short in working space judging from the office towers across the island, there is still a trend in changing the office business. Local co-working space operators emerged back in earliest three years ago, some backed by traditional office business company for decades. However, as one of our friends working in the industry has shared with us, the business is actually not that profitable compared to traditional office lending.
The “Space Economics”
WeWork was definitely the pioneer in the co-working space business. Founded 8 years ago in Soho, New York, the business emerged by the blossom of startups during the time, who mostly prefer a more open workplace. Especially over the financial crisis, many layoffs led to a lower percentage of space rent in the office buildings, worrying property owners to look for tenants. That was where WeWork came in and lend the space to startups and small companies despite the turn-over rate to be potentially high.
However, WeWork was unlike traditional landlord – to be exact, it does not lease out space but allow members to “use” the office space. WeWork invests and owns the office infrastructure and operation, design the workplace in their own term. While the membership is charge by shortest to hours, adding more flexibility to the pricing model as well as charging units (by tables than square meters).
The key feature of the Co-working space is that it promotes collaboration between enterprises. Through the membership, WeWork provides one-stop solutions from space cleaning to office equipment, in addition to mentorships and investment resources needed from the member startups. Another reason for WeWork to be liked by startups so much may be that it helps people “make a life, not just a living, ” which reflects on its design details so different from a common office scene used to be.
Given the success in the startup scene, WeWork is also replicating the model into corporates: Powered By We is a segment serving particularly for large corporates, such as IBM, Verizon – WeWork help operates their offices to be the same level of coziness and innovative. Besides, WeLive (a co-living residence service started from 2016), Rise-By-We (fitness service started from 2017), WeGrow (a Kindergarten from 2017) extends WeWork’s horizon to more than a workplace.
In the meantime, WeWork is inevitably faced by competitions. Merely in the US, Blackstone-backed The Office Group, Spaces funded by International Workplace Group (formerly Regus), Workthere by the global estate agency Savills have all been ambitious in the market. At the international level, WeWork faces competition also with local property managers and office operators. However, even before WeWork was fully opened in Singapore, many seats have actually been reserved by some of WeWork’s international clients by relocating all their local staffs into the space.
This may have explained why WeWork has been expanding so aggressively: after entering China in July last year, it has opened up 7 branches (4 in Shanghai, 3 in Beijing) by the end of 2017, and is expected at least 3-5 more branches this year. In 2017 alone, WeWork has opened up 90 new branches and in 31 new cities globally, accumulating over 30,000 enterprise members signups.
As space business is a solid demand for all companies (before virtual office becomes a common practice, perhaps), WeWork has chosen to enter a sustainable business in the making. Its “rojak type”(mixed) of investors portfolio – including Hony Capital, Legend Holdings (from China), SoftBank Vision Fund (Japan & Saudi Arabia), New Enterprise Associates (US) – is to ensure WeWork’s expansion in many places around the world.
WeWork’s model of short tenancies sets to counter long-term liabilities for corporates is to help clear the balance sheet especially for big corporates, but we are not saying it is going to be cheap – many know a single station at WeWork is costly given the delicately-furnished environment. However, we have still heard rumours from our friends getting promotion calls from their sales agents – calling from heavy discounts with Non-disclosure Agreements. It seems like the user acquisition is still a hard game in terms of this fierce competition.
Another thing is about cultural difference. Having visited quite a few co-working spaces, there were many dissimilarities. Some large companies express their concern to allocate its employees to such a stylish-working environment; on the other hand, for example, some Asian work culture would prefer a more private environment, rather than being appreciated the open space. Cultural adaptivity should always be taken into account for any companies into global expansion.
Finally, we are excited to see how WeWork is making an impact in changing more corners of the world. As it controls the entry points of all companies and freelancers, it can build even larger impacts on the top.
Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed on our blog, please drop us an email at [email protected] and let us know how we can help.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]