[soniman]

This has all happened before. The proto-WeWork was called HQGlobal and the firm behind it was Frontline Capital. The whole thing unraveled in the 2000 bust as the tenants all went out of business and canceled their leases at the same time. WeWork is not going to be pretty when the economy turns. Bill Ackman backed Frontline Capital and it pretty much sunk his first hedge fund, Gotham Capital.

[MuffinFlavored]

> when the economy turns

What if the economy never turns?

[crb002]

It can work, but they need more anchors. Stripe, Gitlab, ... companies that are remote but have workers prefer to cowork. Economic downturn might actually help them if they can gobble long term low leases. More unemployed also means more consumer base outside big corporate America. Their biggest threat is small mom and pop coworking spaces like Gravitate in DSM. Geoff wouldn't sell for less than a massive premium, and nobody is going for WeWorks bad service if they tried to compete.

[duxup]

Do Gitlab and such companies even have the volume of employees to show up on WeWork's balance sheet?

How many of those places have people working at co-working spaces anyway? As opposed to home?

Not sure that during a downturn companies, or even individuals will be more likely to go for paying for fancy coworking space... perhaps less so?

My understanding is WeWork is more likely to be MORE sensitive to an economic downturn compared to their competitors as their valuation will put more pressure on them to make money and arguably they might already be behind the bullet on that one.

[andrewfong]

The anchors might lease, but it's essentially just them mitigating their risk at the expense of WeWork though, right? If Facebook leases an entire building via WeWork rather than doing it themselves (and they definitely have the capacity to do it themselves), it's because they've decided there's a good chance they'll vacate the space in a short period of time and they'd rather sign a short term contract with WeWork than deal with a 15 year lease. That's not great for WeWork though.

[cylinder]

Why on earth would stripe pay a middle man like WeWork to manage their office and lease?! Stripe is looking at buying an entire building. I'm pretty sure they can handle a 15 yr lease just fine. And don't need WeWork staff to decide what their office kitchens need.

[colinloretz]

WeWork has a "Powered by We" service that companies like Amazon use so they don't have to manage a new building. They allow WeWork to deal with everything from top to bottom. https://www.poweredbywe.com/

[wp381640]

Because demand might be elastic and you can keep costs closer to utilization and outsource stuff you don't want to do like manage an office

Same reason companies pay Google and Amazon for cloud servers

[delfinom]

But plenty of "non-WeWork" office space offerings have already been like that for decades. They'll provide janitors, receptionists, etc unless you opt for spaces without it to run your own.

[dagw]

But plenty of "non-WeWork" office space offerings have already been like that for decades.

Cynically, those companies have the downside of needing to make a profit. WeWork strikes me as the sort of company that would happily take a massive loss, just to get to brag that Stripe and Facebook use their services.

[DavidHm]

That's 100% been the case - I am familiar with the industry and they have been more than willing to not make any margin in order to get the clients they want (big names, or poach from the competition)

That strategy works great, so long as you have unlimited funding.

[andrewingram]

Facebook leases an entire WeWork building in London, but I imagine it's not their long-term plan.

[paulddraper]

No one is leasing WeWork as the long-term plan.

That's kinda the point of WeWork: flexibility.

[solidasparagus]

I assume they mean using WeWork for Stripe's non-primary offices where flexibility is often more valuable.

[manigandham]

Stripe is at a size where they can easily afford all the flexibility they need without a middleman company.

[bsder]

Stripe would almost certainly prefer to outsource this for places where they have a small handful of employees, and dealing with one company has a big opportunity cost buried in it that they almost certainly would be willing to pay.

[manigandham]

If that was true then they would be, but they aren't. Companies that big can easily afford one or many full-time employees focused on office and resource management which is more than enough to figure out a few leases.

Remember this is a company that already has a major international business in one of the most regulation industries. Adding in a few real-estate deals is unlikely to be a major source of friction.

[jtonz]

Isn't that We's end goal though? To get billion dollar companies like Microsoft, Stripe, etc. as tenants. People that don't really want to deal with running an entire building when they can just pay someone else to do it.

[abakker]

That is already available. Ever heard of Cushman and Wakefield?

[delfinom]

Counterpoint: Google now outrights owns a absurd amount of buildings outright on Manhattan's West Side near SoHo. These big companies have so much money, that they stand to make even more money just holding the damn real estate for all they care if they end up not using it.

It's the same as a individuals buy vs. rent scenario for a house. Sure, rent may be cheaper, but there are long term pros just holding the property yourself if you can afford it.

[manigandham]

No. Companies that big have the resources and stability do it themselves, and want control over their space as well. They have no need for a middleman other than real-estate brokers or construction companies to actually get the space.

[arbitrary_name]

Yes - but that doesn't indicate that a) the demand exists for such a solution or b) that they will successfully execute on said demand.

[solidasparagus]

'Affording flexibility' means accepting higher costs in order to get short-term leases, which is exactly what companies like We offer. Going the normal office rental route has longer-term leases and thus much less flexibility.

[goatinaboat]

Companies like to brand offices as their own. Their name on the front, their corporate colours in the decor. WeWork offers the exact opposite of that. No company with its own strong brand will want to subsume that brand to that of their letting agent.

[dagw]

WeWork offers the exact opposite of that.

WeWork offers both services. WeWork will just as happily get you a whole building designed and decorated to your exact specs, as they will provide you with 3 desks paid for by the day.

[naravara]

If you want to be durable in a downturn you need resilient or countercyclical industries leasing from you.

If they had a bunch of boring utility companies and collections agencies leasing from them then we might be onto something.