Published in Property Week magazine on 1st November 2018
“Hi! We are the pretentious tossers,” cried Greg Miley, director of Broker and Real Estate Partnerships for Europe, Israel and Australia at WeWork, as he bounded out in front of an audience of dark-suited agents, a bearded pocket dynamo and one-time footballer in skinny jeans, his reddish hair scrunched in a bun. Behind came bearded Freddie Case, UK manager of Broker and Real Estate Agents Partnerships, a former sales manager with Your Golf Travel in similar hip attire.
A crowd from the aptly named TRADS tenant rep network set down on Planet Hip last week. Landing on the communal fifth floor of WeWork’s Cursitor Building on Chancery Lane for their AGM. After AOB, the Greg and Freddie show ran against a background hubbub of occupants supping free Meantime London Lager. The pair made an evangelical pitch, clapping when they made a point, folding arms in unconscious unison when challenged.
Miley is halted minutes into his pitch when challenged with the inevitable accusation “you are just a house of cards”, referring to the losses being piled up as WeWork expands with atomic force. Mmm… WeWork actually feels more like a gambler, with an unimaginably high pile of chips, playing against Regus and traditional landlords. The tenant rep chip is marked: ‘Your take is 10% of our take.’ Landlords need to match these fees, of course, on top of doling out John Lewis vouchers to get TRADS members to even visit
Last month, Japan’s SoftBank indicated a wish to funnel $10bn (£7.8bn) more into the serviced office business, on top of $4.4bn invested last year. The former stake valued the business at a silly $20bn, the second at a completely barmy $40bn. Revenues have soared: $436m in 2016 to $836m last year, to ‘an annualised rate’ of $2.3bn by next month. Losses over 2016 and 2017 of $1.3bn almost exactly matched income. In the first half of this year, $723m was lost. WeWork’s cumulative losses since 2016 look likely to reach $2.5bn by this December.
WeWork is now no mere unicorn. More a 1,000lb gorilla, with a $2.5bn ball chained to its ankle. The business, established in 2010 by vegan Adam Neumann, has 280 encampments, no meat served, in 75 cities across 23 countries. Last December, there were 208,000 desk spaces across 18m sq. ft of space, each earning $4,166 a year, according to a prospectus issued in April to bond investors. The cost of adding each new desk is put at $5,631. Result? Not misery, not yet. Still a joyful determination to keep expanding.
WeWork employs 500 staff at Devonshire House in the City, paying £58m for a 10% stake in the 620,000 sq. ft complex in April. It’s WeWork’s third acquisition in London – it owns 120 Moorgate and 51 Eastcheap, jointly with Rhône Capital. The business now runs 2.6m sq ft of space in more than 40 London buildings. Secured via outright purchase, persuading landlords to joint venture, or simply by taking a long lease. JLL, CBRE and C&W are all out hunting for acres more space in Manchester, Birmingham and Scotland.
A precis of Greg’s undoubtedly compelling pitch: “We are 92% let in London. We want to double from 40 to 80 buildings by next year. We are currently negotiating five or six transactions. We know we are coming toward a correction. We are diversifying by mitigating risk. We are doing deals very differently from two or three years ago. We are looking to share with landlords. We do that and keep up our occupation levels; it means we will be here for the long term. We are not saying we are taking over.”
The fifth floor was still packed at 7pm. The atmosphere, All Bar One. The clientele mostly in their 20s. Customers will pay high prices in the right bar, so to speak, just to be with the right crowd. I say this at the weekend to a young relative visiting from San Francisco. He works for a profitable unicorn. He snorts: “We got out of our WeWork offices in New York. Noisy, small and full of people who want to feel successful, but aren’t yet. But they are willing to pay for swanky offices to impress investors. WeWork has tapped a deep vein.”