WeWork Competitors Not Deterred Or Elated Over IPO, But They Expect Industry Consolidation
If WeWork goes public and its stock value wanes, some would consider that a massive stain on the concept of coworking as a sustainable industry.
But WeWork's competitors remain bullish on coworking regardless of what happens to the mega-competitor or whether its initial public offering creates negative or positive buzz.
With 20 locations and plans to open about five next year and every year thereafter until reaching 50 to 75 locations across the country, Howard is confident in the market and WorkSuites' role as a regional player.
Howard believes WorkSuites — which has a style that falls somewhere between WeWork's millennial vibe and Regus' executive-suite style — is positioned to maintain its loyal footprint. He said his company is different enough from WeWork to benefit whenever WeWork raises coworking's profile, but still survive if WeWork faces sudden backlash.
“In addition to the local versus global difference, there’s obviously a lot that goes on in terms of customer service, community and all of those sorts of things,” Howard said. “But also there is just a totally different feel, a sports car versus a luxury car versus a utility van. They are separate things and people buy them for different reasons. It’s the same in coworking; there are different feels.”
Even with that differentiation, Howard acknowledges the impact WeWork has had on the industry so far.
“I feel like sometimes I’m the only one rooting for WeWork. Everyone seems to be not only predicting, but almost rooting for, their failure, and yet I feel like they have done our entire industry such a service by increasing market awareness for what we do and demand for what we do,” Howard said.
Common Desk has a smaller, much more focused footprint with locations in DFW and Austin and plans to keep expanding in Texas.
“It was probably the moment when they started taking big-time institutional money that put incredible pressures around growth,” Clark said. “That’s where we’ve been very cautious with the type of money we take in as an investment into Common Desk, because if you are opening 10 to 100 locations a month, you can no longer focus on the customer the same way as the company that is opening one location every three months."
A recent report from Ropes & Gray asked executives, lenders and investors in the coworking space their thoughts on the future and found 61% of lenders believe the shared office industry is less vulnerable than traditional office space in an economic downturn.
Both Clark and Howard see something else on the horizon for every player in coworking — whatever happens to WeWork, the entire space is headed for consolidation.
“I certainly do not think that a WeWork IPO means that this industry has grown up or has become stabilized,” Clark said. “I think over the next few years, you are going to see consolidation. You are going to see some brands that simply cannot have enough of a differentiating factor to be able to last and continue on. Then you are going to continue to see a couple of new brands emerge to go from great regional providers to impactful national players."
“I think it will definitely happen,” Howard said. “It happens in every industry as it matures. We have been an immature, fragmented industry and certain people just do it better than others, and the strong will gobble up the weak.”