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Analysts revealed that office property players, such as landlords and brokers, are worried over WeWork’s encroachment on their businesses, reported the Washington Post.
“By participating in virtually all the elements of the real estate food chain, WeWork will find themselves in deeply competitive situations with others.” And this could negatively impact WeWork’s access to some office buildings, said Cedrik Lachance, research director on real estate investment trusts at Green Street Advisors.
For instance, a larger amount of WeWork’s business is now derived from big firms, which are typically sought after by landlords to fill up their properties. In recent years, 30 percent of its users have been working for entities with at least 1,000 personnel.
“A lot of people originally thought of the shared office-space providers as bringing tenants,” said Tony Malkin, CEO of Empire State Realty Trust, owner of the Empire State Building in New York.
“But I think now we’ve seen – particularly with WeWork and other (coworking space) providers’ expansion into the enterprise solution – that it’s really much more about disrupting the relationship of tenants to landlords, of tenants to brokers, of brokers to landlords.”
While the office-sharing giant entices brokers with hefty commissions to bring in tenants, it has displeased brokers by cutting them out of deals. It is now competing with brokers by directly referring small and medium-sized enterprises to property owners and charging a fee, said employees of two big property brokerages, who requested anonymity as WeWork is a customer.
Nonetheless, WeWork contends that it assists landlords to improve their buildings, and its operations also boost the rents and market price of a property.
“They’re a good tenant – tough and exacting on their lease and space requirements, but they generally improve the image people have of a building,” noted Sonny Kalsi, a founder and partner at GreenOak Real Estate, which leases properties to WeWork in Tokyo and New York.
Moreover, the coworking space giant has ventured into property acquisitions by buying the Lord & Taylor building in Manhattan through a tie-up with private equity firm Rhone Group.
It has also established a property investment fund dubbed ARK. In line with this, it has appointed New York REIT’s former head, Wendy Silverstein, as Chief Investment Officer. It has also hired four property acquisition experts since May.
But analysts warned that the biggest potential risk to WeWork is other major companies venturing into the coworking space business.
For instance, CBRE Group recently launched a company called Hana that assists property owners in creating their own flexible offices. Also joining in the action are Tishman Speyer, Silverstein Properties and Land Securities plc.
Meanwhile, Blackstone and Brookfield Property Partners have appointed other coworking space operators like Convene and Industrious to oversee their versatile offices, although both have leased premises to WeWork.
Backed by its biggest investor SoftBank, WeWork has grown into one of the world’s most valuable startups with a market capitalisation of at least US$42 billion, which was achieved through a global leasing spree.
As of Q3 2018, it has over 300 locations across 83 cities, including nine in Singapore. These include premises in 60 Anson Road, 71 Robinson, 8 and 22 Cross Street, Beach Centre, Suntec Tower 5 and 8 Claymore Hill, all of which are within the central region.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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