WeWork Launches Another New Business, This Time Aimed At The Missing Middle
WeWork is the dominant figure in the coworking space, pioneering creative spaces for freelancers and giant companies alike, built on the power of community as a draw for 21st-century workers.
But on Wednesday, the company announced a new product line aimed directly at midsize companies that want to be members at a WeWork, but don't like to share.
HQ by WeWork is a new product aimed at giving companies with between 11 and 250 employees WeWork-designed, managed and leased space. The offices would be private, flexible and offer fewer services than a traditional WeWork, but have the benefit of being exclusive to one company.
Rather than a month-to-month lease for small offices at a traditional WeWork, HQ by WeWork will be spaces WeWork leases with a landlord, and designed as the member company chooses from a menu of features. The spaces are offered to companies that commit to two-year membership agreements, and won't have the concierge services, fully stocked pantries and kegs associated with coworking.
"We heard from many, many, many current members, prospective members and through our research what was needed for a product like this," Medium Business Segment Senior Director Michael Hershfield told Bisnow. "We've solved for enterprise [companies] and we solved for the small or consumer segment ... Using a lot of the data we looked at, we came to where we are."
HQ by WeWork has started with six locations in Manhattan, all of which are committed to undisclosed tenants, Hershfield said. WeWork plans to grow the platform more in New York — where WeWork was founded, is headquartered and has launched many of its ambitious business offerings — and to soon offer it in Toronto, San Francisco and London.
The new business line adds another arrow in WeWork's quiver as it takes aim at every segment of real estate. In addition to its coworking and enterprise offerings, its Powered By We business designs headquarters that companies own or lease themselves. It offers apartments and short-term rentals in WeLives in New York and near Washington, D.C., and it has launched a gym, a school and a retail concept over the last year.
WeWork's traditional business has grown at a rapid clip all the while, as it is now among the largest private users of office space in New York City and the largest private tenant in London. Don't expect that growth to slow as HQ by WeWork starts to speed up, Hershfield said. The two segments of the business will operate and grow independently of one another.
For office landlords, the HQ line gives them another avenue to attract WeWork to their buildings. WeWork will use neighborhood data to determine where and how many offices to open, and will sign leases for HQ by WeWork and offer a variety of options to midsize companies that express interest.
Those companies will then get to choose their designs, whether there is a focus on open seating, private offices or collaborative spaces. While each will cost a different amount depending on the company's selection, Hershfield said, they will largely be cheaper on a per-square-foot basis than a traditional WeWork deal.
"We have identified that one of the key hallmarks of this segment is price sensitivity, and we’ve tried to find places we can shave off costs. That’s very top of mind," he said. "As we scale up, we want to find a value solution there."
The scaling up could be dramatic. In its announcement, WeWork said there are 1.1 million businesses with 11 to 250 employees, with a total of 30 million workers employed at those companies. WeWork research shows 46% of those businesses expect to grow their employee numbers in the next year. HQ by WeWork deals will allow those companies to easily increase the number of workers they have, and members will be able to use desks and amenities at traditional WeWork locations.
With 287 locations globally and a network of members approaching 300,000, WeWork's new business line is going after the companies that have powered the rise of pre-built spec suites in major cities and are occupying the spaces of Knotel, which distinguishes itself not as a coworking company, but a provider of custom headquarters and flexible office space. And WeWork does not plan to scale slowly.
"You can expect us to be in all of our major cities at the end of 2018 and [in ] 2019," Hershfield said. "We see all of our top cities as clear candidates for rapid growth.