WeWork turnaround driven by companies seeking flexibility in uncertain times
By Cecilia Chow
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - Co-working giant WeWork’s fortunes are turning around, despite or perhaps because of Covid-19. After all, WeWork was founded in 2010 — on the back of the Global Financial Crisis, when it turned nondescript, vacant office buildings into workplaces that attracted millennial talent.
Tan: We are one of the biggest occupiers of Grade-A office space in the CBD and Singapore continues to be one of our key cities in the region (Photo: WeWork)
In 1Q2020, WeWork reported revenue of US$1.1 billion ($1.49 billion) — the first time that revenue crossed the US$1 billion mark — and a 45% jump from a year ago. In 2Q2020, revenue was US$882 million, 9% up from the year before. Meanwhile, its lead investor Softbank has committed US$1.1 billion in new debt financing last month.
“We have a five-year strategic plan that is starting to pay off,” says Ray Tan, head of growth for WeWork Southeast Asia and Korea. At the onset of Covid-19, WeWork still saw an 11% increase in terms of enterprise members across the region, adds Tan. “It’s a testament to how our product is still relevant to the market today, even in times of uncertainty.”
It’s during such times that WeWork believes in working closely with international real estate brokers the likes of CBRE and JLL. “WeWork solutions don’t come with just space, but are packaged with the services that we provide,” says Tan. “On the commission front, we actually provide brokers with a higher commission compared to traditional leases.”
The WeWork at 8 Cross Street (Photo: WeWork)
Given that real estate brokers are an integral part of the business — not just in helping WeWork to secure a space in a building, but also in proposing WeWork as a solution to their clients — Tan believes transparency is key. “Whether in good times or challenging times, we’re always focused on sharing information with the brokers as much as possible, so that they can communicate to their clients,” he adds.
Brokers reciprocate by sharing with WeWork the challenges or “friction points” posed by their clients and engaging the co-working operator in finding a solution. “Some of the typical challenges that we hear from our brokers is on flexibility — the need to downsize or upsize; or addressing some of the space requirements like underutilisation or overcrowding,” adds Tan.
Flexibility, scalability
More companies are interested in flexible office space as they seek shorter-term commitments as a way to rationalise their operations, said Colliers in a report on Aug 25. That’s where co-working players like WeWork play a key role in that scenario. One of WeWork’s key leverage points is its extensive global portfolio: from 828 locations across 149 cities in the first quarter, to 843 locations across 150 cities at the end of the second quarter.
The WeWork in Suntec Tower 5 at Suntec City (Photo: WeWork)
Enterprises, which are companies with more than 500 employees, made up 48% of WeWork’s memberships in 2Q2020, up from 45% the previous quarter. As at end 2Q2020, WeWork has 612,000 members, a 16% increase y-o-y. “It’s a lot easier for enterprises which need to expand across Southeast Asia or other parts of Asia,” says Tan.
Firms are adopting a more diverse real estate strategy, stressing employee choice, notes Sam Harvey-Jones, Colliers International managing director of Occupier Services, Asia. “This may well involve a combination of retaining headquarters in the CBD, perhaps at a reduced footprint, coupled with suburban hubs, flexible space and remote working,” says Harvey-Jones. “The global work-from-home experience has shown that remote working is here to stay in some capacity; both employees and their managers see the benefits. However, home working will complement office work, not replace it. Physical offices will remain as an anchor and key to promotion of corporate culture and mission.”
WeWork’s Tan agrees. “Remote working brought about by the pandemic has given the office a more defined purpose – for collaboration, community and promoting corporate culture,” he says. “Total work from home approach is not sustainable nor a realistic long-term solution, because in-person social interaction is important for innovation and building corporate culture.”
The WeWork at Funan opened last year in the new mixed-use development by CapitaLand (Photo: WeWork)
In its Occupancy Benchmarking Survey of 3,000 employees, published in July 2020, JLL predicts that 30% of office space will be flexible by 2030. The study highlighted that while workers are keen to continue working in offices after the Covid-19 pandemic, they would also like to have more freedom over where they work, including having the option to work from home for one or two days a week. Meanwhile, two-thirds of industry leaders in global real estate are beginning to implement workplace mobility programmes, which allow staff to work in more flexible locations, said JLL.
Co-working — office of the future
These trends lend themselves to the significance of co-working operators like WeWork in the future of office space. Flexibility is key, especially as companies explore a staggered or phased approach for their employees to return to the office, with safe management measures to be implemented.
Covid-19 has also accentuated the importance of future-proofing one’s business operations, says Tan. By opting for flexible space solutions like WeWork, companies can reduce occupancy-related costs by up to 50%, he estimates.
The flexibility that WeWork provides has translated into increased confidence among its members, especially those in Singapore (Photo: WeWork)
Interestingly, the flexibility that WeWork provides has translated into increased confidence among its members, especially those in Singapore, where membership commitments are two to three times longer than the average across Southeast Asia, notes Tan. For instance, there has been an increase in membership commitments for five to seven years, he adds.
WeWork has also changed the way it operates in the Covid-era of safe distancing. In the common areas, there are wayfinding signages to help people navigate around the spaces. Notices have also been placed outside different meeting rooms, stating the capacity limit for each room and which rooms are to be kept vacant as buffer spaces, to prevent overcrowding. Hygiene and cleanliness of spaces has been stepped up, with hands-free sanitiser dispensers placed around the place, especially near high-touch areas such as door handles and doorways, staircases and lift areas. Frequency of cleaning has also been stepped up.
There’s an increase in demand from both companies and individuals who want an alternative location — for those who choose not to work from home but remotely. “This is most prevalent in Singapore, where space is a luxury,” says Tan.
The location at 380 Jalan Besar is one of the city fringe locations that opened last year (Photo: WeWork)
CBD, city-fringe locations
More firms are willing to consider decentralised areas as well as the CBD. Some enterprises are looking at a “hub-and-spoke” model, where their workforce is distributed across multiple WeWork locations within the CBD, but all located within a five-minute walk, says Tan.
At Raffles Place, WeWork has expanded its presence at MYP Building at 9 Battery Road from three floors to 14 floors. It is also going ahead with its plan to take up the entire 21-storey building at 21 Collyer Quay (the former HSBC Building), and several floors at the former Chevron House at 30 Raffles Place. These are scheduled to open by next year. “We have seen strong pre-opening activity,” says Tan.
The WeWork at MYP Centre in Raffles Place is expanding from three to 14 levels within the tower (Photo: WeWork)
For instance, a company is taking up four floors at one of WeWork’s upcoming locations at Raffles Place and establishing it as the regional headquarters. Another enterprise, a travel company, has scaled down its operations in the rest of the region and is instead, consolidating its presence in Singapore, its regional headquarters, where it will be taking up an entire floor in one of the upcoming spaces at Raffles Place.
WeWork members are a diverse mix, and besides enterprises, they include government agencies, for instance, the Ministry of Culture, Community and Youth. “We’re continuing to see more government groups that are considering WeWork as a way to scale their operations too,” says Tan.
The opening of the two new locations at 30 Raffles Place and 21 Collyer Quay will increase the number of WeWork locations in Singapore to 14 from 12 today. This will increase WeWork’s footprint in Singapore by three times, from a year ago. “We are one of the biggest occupiers of Grade-A office space in the CBD,” says Tan. “Singapore continues to be one of our key cities in the region.”
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