WeWork Rivals Create Less Risky Co-Working Models To Gain Competitive Edge
WeWork’s business model has worked wonders in an expanding economy, pushing the company up to a near $17B valuation, but now competitors are looking ahead and shifting strategies to prepare for the long term.
Simply put, WeWork’s model is to sign long-term leases for office space, refurbish that space and then rent it out in small chunks at high monthly rates. This model carries a lot of risk due to its high fixed rent costs, and investors are now throwing money at firms trying different models, the Wall Street Journal reports.
San Francisco's RocketSpace is one such firm, having received a $336M investment from China's HNA Group in August. RocketSpace aims to be an operator of the spaces, taking a fee while leaving landlords responsible for the cost of building out space while collecting the upside as rents rise. While this model is not as attractive as WeWorks, it carries less risk and could perform better in the long term. Serendipity Labs, another co-working startup, is modeling its business around franchises, where franchisees pay a fee and then build out locations in a mold approved by the company. [WSJ]