By Jack Stubbs
WeWork continues to make waves in the commercial real estate industry as it looks to build on the platform it began building in 2010 as a provider of co-working spaces for smaller companies to come together to collaborate.
Nearly a decade on from the company’s beginnings, in mid-August of 2018, the company announced the launch of a new initiative: HQ By WeWork, a new offering created specifically to meet the needs of medium-sized businesses, which WeWork defines as companies with 11 to 250 employees.
Initially when it was founded in 2010, WeWork’s offerings met the needs of smaller- and larger-sized companies throughout the industry, which now comprise a significant amount of the company’s membership base, according to a spokesperson for WeWork. “If you look at WeWork and the origins of the business, we were founded in 2010 as a place very much for entrepreneurs and startups and smaller businesses to come together; then what we saw was that a lot of big companies were coming to us, too,” the spokesperson said. “We started our enterprise business, which we defined as any company with over 1,000 employees—the Facebooks, the IBMs and the UBSs—and really built up that business, which didn’t exist two years ago that now accounts for close to 30 percent of our overall membership base.”
The recently-announced HQ By WeWork Program, which began in New York City where the company has already signed six leases—and will next be rolled out in San Francisco—is meant to cater to the needs of the various medium-sized businesses going through transitional periods of growth, according to the spokesperson. “A lot of the medium-sized companies were members, but we tried to think what else we could do for them…for whatever reason, they were identifying a couple areas that they could use more [improvement] on, such as privacy [concerns] and maintaining more identify and flexibility…these companies are going through interesting phases of growth and want to have the ability to upscale or downscale depending on how their business is performing,” he said.
While WeWork will continue to cater to these medium-sized businesses within their existing spaces—as of 2018, WeWork has 280,000-plus members across 287 locations—HQ By WeWork will be different in that it will look to deliver office spaces that are more specifically-tailored to the company in question rather than reflective of the broader WeWork brand. “We will continue to have medium-sized businesses within WeWork locations as well, but what’s different about HQ By WeWork…is that say that you’re a company with 40 employees and you have a flexible workspace in WeWork, it’s very clearly a WeWork location, is WeWork-branded and has a WeWork reception area,” the WeWork spokesperson said. “HQ By WeWork is different, because these aren’t going to be your stereotypical WeWork location…when you come into the building, it won’t necessarily be WeWork-branded; the program is very much [about] us providing office space to these companies without necessarily the whole WeWork suite of services that happen within our locations everyday. It is a more bespoke offer.”
It could be that WeWork is hoping to capitalize on the increasing importance of medium-sized businesses in the national economy. Medium-sized businesses account for approximately 1.1 million businesses in the U.S. and are responsible for employing approximately 30 million people, according to data compiled by WeWork and provided by National Center for the Middle Market. 2.2 million medium business-segment jobs were added across major industry sectors and U.S. geographies during the financial crisis from 2007 to 2010. WeWork estimates that 70 percent of jobs globally are generated by medium-sized businesses.
Another of the broader objectives of the HQ By WeWork Program is to enable medium-sized businesses the ability for flexibility as they enter transitional periods in their growth trajectory—as is the case with traditional WeWork office space offerings, the idea is that WeWork is allowing these companies to occupy space without committing to long-term leases, according to the company’s spokesperson. “Every company at that point needs [more] space, and historically what’s happened is that say you’re a company with 20 people today…and you are forced to take a lease for a minimum of three, maybe five, years. And over that time you would expect to grow,” he said. “[But] you don’t want to sign a lease for a space that will accommodate those 20 people, you want to sign a lease that will accommodate maybe 40 to 60 people depending on what your aspirations are in terms of employee growth.”
According to the National Center for the Middle Market data, 46 percent of medium-sized businesses in the U.S. expect to increase the size of their workforce in the next year.
As one example of a medium-sized businesses locally within the Puget Sound region, Bellevue-based technology and business consultant Buildingi decided to move to a WeWork space in late 2017 rather than renewing its lease, a decision that has since allowed the company to broaden its scope. The company’s previous office was a 3,800 square foot space was at Bellevue Pacific Center (188 106th Ave. NE) with a 5-year lease that started in December 2010, and the company has since moved to a 760 square foot space in one of WeWork’s Bellevue locations in Lincoln Square located at 10400 NE 4th St.
Buildingi—which also has a Costa Rica office—began its exploration of WeWork by renting two four-person spaces for a few months to evaluate the environment, amenities and impact to the team’s work pattern and then began occupying the new 760 square foot space—which accommodates between 10-15 employees on a typical day—on an 18-month term. There are about 40 employees that cycle through using the Bellevue WeWork space, and some of the employees work through the company’s remote work program.
As another example of a company participating in the world of shared office space, Knotel—a Berlin, Germany-based company founded in 2016—looks to provide solutions to established companies that need space quickly but who are not in a position to sign long-term leases. Knotel looks to cater to growing companies with between 50 to 100 employees who are unable to project their needs more than 1 or 2 years out. After two years, Knotel has grown to operate nearly 2.5 million square feet in New York, San Francisco, London and Berlin.
Since announcing HQ By WeWork in mid-August, WeWork is already looking to build upon the six current locations in New York. “Since launching HQ By WeWork, we have been inundated with enquiries from businesses looking for private, flexible, cost-efficient spaces that allow them to reflect their identity. Having already secured six locations in New York, San Francisco was the obvious next destination,” said chief growth officer David Fano in a statement. “We’re delighted to be bringing HQ By WeWork to the incredible companies based in San Francisco.”
WeWork has already made its mark in the Bay Area city, and recently signed its first lease there south of the Financial District. The company signed a lease for just over 17,500 square feet at 800 Market Street and will be taking up four floors with the average floor plate comprising 4,412 usable square feet. According to Arash Gohari, executive vice president of global real estate at WeWork, the lease at 800 Market will serve as an ideal platform from which the company will expand HQ By WeWork in the future. “Located in the heart of Downtown San Francisco, 800 Market Street is ideally positioned to serve the ever increasing number of innovative companies in the city,” said Gohari. “Following this deal, we remain on track to secure approximately 1 million square feet dedicated to HQ By WeWork within 12 months.” The company has already agreed terms for 400,000 square feet and are in the final state negotiations for another 550,000 square feet.
At this moment in time, WeWork is unsure where it next plans to implement HQ By WeWork, but this will likely unfold over the next few months, according to the spokesperson. “We kicked things off in New York, and in San Francisco we just announced 88 Market Street, and there will be more after that,” he said. “In the coming months, we will be having conversations with companies both within and outside WeWork, and we’re seeing a lot of demand. So, I expect we’ll be in a position to share more on that, but at the moment it’s a little premature to go into specifics.”