29 thoughts on “WeWork”

  1. I dunno. WeWork sounds more like the large open rooms Corporate America favored back in 1950s for their lowest-on-rung middle managers. Jack Lemmon’s character in the Apartment worked in such a room. Or like a reading room at a major university library. Everybody working on their own stuff but knowing all the people in their immediate presence. It’s not for me. Too distracting if I have ear cocked for snatches of overheard convos by friends. When I do serious work I want total privacy. Or I go to a coffee shop, say, where other patrons are just white noise.

    1. I agree, but the WeWork model isn’t meant to satisfy every need for everyone. It’s just one option for people who like it – or at least people who find it imperfect, but cost effective. WeWork (and many other co-working spaces) do offer fully enclosed offices too. Everything is available at a price.

  2. When I was a kid, NYC had a lot of flop houses and SROs. They were eliminated by a number of forces. There was the rising value of the real estate that made it more economical to remodel them as multi-room apartments or licensed hotels. There were the laws that prevented their new construction. There were also the increasing number of laws protecting tenant’s rights.

    The Lyon’s family owned several dozen flop houses in the Bowery and Lower East Side. They had hard ass rules about disturbing the peace, paying one’s rent, keeping the place clean and so on. They were enforced by the threat of prompt eviction and being banned from renting. New rules made it harder and harder to evict or ban anyone. A tenant who didn’t pay rent could stay on for months until court proceedings finished and appeals were exhausted. It took expensive legal work and time to kick out a trouble making tenant. These rules made the business or renting by the night or week less and less tenable. By the late 1970s, most of the places were closed, even before the soaring real estate prices took hold. (I think the last flophouse held on until 2009, but it was but one of a handful left.)

    It always seems to be a mixed bag. One of the things that kept rents down after World War II was the subsidized development of the suburbs and various forces, like road construction and fear of crime, pushing families out of the city. Into the 1980s, inner city rents were relatively soft. Then urban living started becoming attractive again, even before the crime rate started to fall in the 1990s. It was partly a social thing and partly a matter of transportation systems being saturated. As urban living became more attractive, the prices went up and condo conversions were increasingly common. It was good for cities, but rough on anyone trying to live in one.

  3. WeLive seems to me to be like a giant group house. I was in group houses when I was young and enjoyed it very much.

  4. WeLive sounds like an interesting concept. Millennials are really into co-living and on the whole comfortable with surveillance as long it’s a brand they respect. I don’t think it has legs beyond expensive urban markets though. It’s only in those markets that there’s a population transient (and wealthy) enough to consider the extra expense of becoming WeLive “members” vs. a standard rental to be worth it.

    Case in point: I’m in Salem, Oregon, which is a pleasant enough state capital but a second tier city at best, even though it’s just an hour outside of Portland. Plenty of affordable housing. There’s not much reason to rent an apartment (plenty of SFH rentals available) much less a more expensive co-living arrangement.

    1. We agree that the current WeLive model is a niche product for specific locations. What fascinates me is how the underlying business dynamic will mature over time. Companies must continue to grow or die so they will find new markets to tap lower down the food chain. WeLive will also inspire imitators. I see a volume industry in virtual property management ramping up all over from elite private gated communities to low rent garden apartment complexes.

    2. We’re not “into” it anymore than ’49ers were “into” flophouses. We are doing what we can to live in the economic reality where we are, and to find opportunity where we can.

      1. Excellent point. I’m pretty sure if Millennials weren’t burdened with massive student loan debt, had secure jobs, and ready access to comfortable homes at 1950s prices they’d already be moved in by now.

        1. There are buying houses and paying off debt. Just not in San Francisco. It’s sad to see the S.F. experience reduced to a bullet point on a resume (‘worked at a startup from 2016-2018″) and I vote for more housing whenever I can. But people keep coming, taking those high paying jobs and then proceed to whine about the high rent, the homeless, the lack of culture (vs NY or LA) and the over-burdened public transit. I’m just like, well kid, look in the mirror.

  5. Frankly, I don’t know. The idea is very utilitarian and corporate but it has no real human roots. It will work wonders for corporations who want to send people all over the place (there are plenty) but for the common man? I don’t see it happening. There may be some alternatives that develop in the low-cost, low-end housing spectrum, but how would this translate to the people you profiled in Hawaii who are living 10-20 to a home to get by? I don’t think it will. The people who are in need of homes (or spaces?) to live in cannot afford this type of high end scenario. Just my thoughts.

    1. We currently live in a cultural environment where only single family homes and a few garden apartments exist in most places. Those don’t serve a significant segment of the population, but nothing else is legally acceptable. WeLive type places could provide one more option. And as I said, market segmentation will eventually create less expensive alternatives in other areas.

  6. Like you Johnny I find this kind of development extremely interesting. I really like the re-use of space. Putting aside the “real estate bank” issue mentioned earlier, there are two things that concern me though. One is the “gated community” effect put in place by the technology – AND having to sign a lot of rights away. That’s a whole discussion on its own.

    The other is the sociological aspect. For any kind of community to work there is an organic piece that has to be present. Just like growing plants in the garden, you can provide all the right environmental conditions but you can’t make it grow. Once it starts growing it often becomes healthy and thriving and then you never know what you’re going to get.

    But if nothing takes, then you just have a bunch of people using the same space with no actual connections. This means that if a certain condition changes, the tenants (not members) will immediately move on with no regrets and we can all talk about what a great idea it was but it’s still over – at least until favorable conditions return. In other words it doesn’t have the stability and staying power of a more natural human community bound together by family ties or agriculture or something like that.

    1. I have the same general attitude. I prefer things that are organic and flexible. But I’m happy to let people live in suburban gated communities, age restriction developments, and HOAs with every imaginable rule and regulation if that’s what they like. Such places also act like giant sponges to absorb all the folks who would be terrible neighbors if they were somehow forced to live in the less constricted places I like to be. So I’v grateful the Upright Citizens of America are all comfortably fortified in their private enclaves far far away.

      My friend Kirsten did a short video about a co-living space in LA that works largely because the self selecting population is well behaved. https://faircompanies.com/videos/la-coliving-a-permeable-intersection-between-socialprivacy/

      1. WeWork seems a little too uptight to me. How is accessing the roof a capital offense? Otherwise, an interesting concept that could have promise at a more downscale level with less restrictions. And those cameras give me the willies. 1984 anyone?

    1. Very cool graphic and lots of historical info. Thanks for the link. I suppose most middle class people (who actually have the suburban house they want for themselves) can’t imagine any other kind of accommodation.

  7. There are two aspects of WeWork.

    The first is real estate as a service, available in smaller bundles with more included, rather a place. You don’t have to lease a whole floor if you are just starting out, you can lease a desk and we’ll provide a receptionist and conference room and tech support if you need it.

    This business has been around for a long time — office suites – but WeWork is rebooting it by wrapping it in “tech” and riding a boom in more flexible arrangements and greater self employment.

    The other aspect, however, is that WeWork is a real estate “bank.” A financial bank borrows short — deposits that can be withdrawn at any time — and lends long — mortgages, business loans and the like. It’s very profitable as long as the economy is up and confidence is high. Otherwise, you get bank runs.

    The prior versions of WeWork owned their spaces, but WeWork leases them for years — at one price — and tries to re-lease them day by day — for more. But if the economy were to contract, more deals were to open up elsewhere, and confidence in WeWork’s ability to meet its monthly nut fell, there could be a run on the real estate bank — WeWork or one of its competitors.

    If these firms were financial banks, they would have to hold capital to allow them to take losses until things turned around, avoiding a short-term liquidity crunch. At some point we’ll see how much capital they have.

    1. I learn so much from my readers!

      Love the “real estate bank” analogy. Yes, WeWork is involved in arbitrage. Leverage is magical in an expansion, but bites you in the ass in a contraction. In the next market correction WeWork could experience a “liquidity event” and choke.

      But… I learned something during the Dot Com crash. I was talking to a guy who owned several large commercial properties that he had bought with multi-million dollar loans. When his Dot Com tenants went poooof! his buildings went dark along with half the other properties in the area. He put the situation this way. “The bank has a real problem with these non-performing loans. They better work with me to renegotiate the terms or they’ll have an even bigger problem on their hands.” Short version – if you’re a little guy they put the screws to you. If you’re a billion dollar entity they suck it up until things get better.

      1. Savvy landlords often demand that risky startup tenants put up collateral, often in the form of a letter of credit or restricted cash in escrow accounts that the landlord can draw should the tenant fail to make rent. That’s what the “restricted cash” line item was on so many dot.com balance sheet was during that era. Still happens today. Of course, a startup needs the formal VC funding to have the cash to post. Earlier stage firms don’t have that and perhaps are still working out of garages or have made the move to WeWorks.

        I’ve been in a couple of WeWorks. Young people like them. There is a lot of interaction between sharp young folks doing different things. They have some similarities with incubators. Once an operation achieves formal investment, however, the investors become concerned about IP protection and keeping a bit of a wall around things, hence the moves to their own offices (and often the posting of collateral for the new landlords). To expand on Larry’s point, WeWork’s tenants are often just past the two guys and a dog stage of entrepreneurial endeavors, but still living on soft drinks and burritos that they can barely afford.

        Heh. I think WeWorks is doing something useful, but, yeah, they are taking some risks.

        1. The company I saw move to the WeWork has several hundred employees in multiple cities and they have positive cash flow – as in, they’re actually profitable. My take on their move to WeWork was twofold.

          First, the old CEO was all about presenting an outward image of a company that was respectable and established enough to have a full floor in a Class A building downtown. The new CEO just wanted to hit his targets and get his performance bonus for the year so shaving $2M off rent was easy.

          Second, having space at WeWork makes it so much easier to liquidate entire divisions and move people around the country – or the world – on a whim. This will come in handy the next time a CEO needs to boost his numbers ahead of his next bonus.

          1. We have as friends a couple who had a graphic design business, but moved into semi-retirement. What keep that up an night? Paying the rent if business dried up, which happened to them in multiple recessions and they had to scuffle to survive.

            So he was thrilled when that last lease ended and the last of their employees moved on. He worked out of a co-working space — not We Work but one of their competitors — and she worked at home for a couple of years before he eased into teaching.

            The co-working space didn’t just provide services. It shouldered that risk.

            1. And on a grand scale…bundle up 1,000 or 10,000 of your friends’ situations and outsource the risk to the big banks (which are too big to fail). At the end of the day it means “outsource the risk to all of us”.

              Market socialism, or social insurance, though the folks in Washington would recoil at that description. They’re just happy someone gets rich (and makes unlimited PAC donations to reduce the taxes on real estate deals). The little guy is happy to have the option no matter what it is called.

              And so does this ultimately make the system more resilient or more fragile and complex? There are aspects of both.

      2. Hence the old joke (paraphrasing): If you owe the bank $100,000, its YOUR problem. If you owe the bank $10,000,000, its THEIR problem.

      3. Which brings up another reason why buildings sit empty. If the owners (and banks) were forced to recognize the utter fantasy of how they’re valuing those properties (for balance sheet and debt collateral numbers), they would perhaps be bankrupt. As long as an actual flesh and blood lessee or purchaser doesn’t set the actual market value with a transaction, the numbers are what the owner, banker, ratings agency, etc… says they are.

  8. As the over-saturation of the urban market continues it’s march towards unattainable levels, I agree many of the aging office parks & strip malls (especially in first ring suburban environments) should (and will be) the next frontier for recent college grads, artists, immigrants etc. This whole branded “Co-Housing Lifestyle Living Center®” I’m seeing in WeLive’s marketing just isn’t for me. Good for them if they disrupt the old system to make it easier for others to follow, but I’d much prefer a smaller scale Co-Housing scheme done more organically and with less rules. 🤷🏻‍♂️ I especially find the tenets laid out in https://thehappycity.com/resources/happy-homes/ to be a nice guide for retrofitting these spaces into Missing Middle type Co-Housing by smaller scale or Incremental Developers.

  9. Huge fan of your blog and I think you are describing what will be THE development trend for the next generation.

    Uber discovered that there was a loophole in providing Taxi-like service. They used the private “Black car” industry as their regulatory foothold.

    Similar to Taxis, cities have an expensive and Byzantine framework to regulate against mixed use apartment buildings. But almost every city has the equivalent of the “black car” in the form of “home based business” and potentially “month or more room rental” (i.e. roommates). This allows for live-work in many more places that people realize.

    I’ve been through the Incremental Development Alliance framework and I have come to the conclusion that trying to do mixed use is very risky and expensive. So my first project will be a rural live-work that is geared toward families, market gardeners, and artisan/Etsy makers.

    That’s the thing, this live-work concept will manifest in different ways around town. In the urban core it will be hipsters+restaurants+online work. In a more suburban area it might be crafty moms+organic gardens+shared childcare.

    I also see this being way more accessible to even more developers. The much derided house-flippers have the skills, with some extra drywall, to convert nearly any property to this format. This is big.

    1. You are correct about that. Many cities historically zoned housing separate from commercial spaces, but hotels are not ‘housing’, and thus can go in fully commercial spaces like office parks without a difficult rezoning case. The SRO company can put one of these in and call it a ‘hotel’, and the city is happy to have it. Boom. Additional housing. Sure, the first ones built won’t be for marginalized populations, but the next set built will be.

      1. I wonder. A company I worked for tried to add a couple of “hotel” rooms in its office space to accommodate visitors. But the city forbid it, so converted to conference rooms. Not sure if zoning or mixed use issue. Would have been nice to have as a nap room for those late nights!

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