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WeWork: Meet Me in the Middle

Coworking Giant Creates Business Line for Mid-Sized Companies
August 10, 2018
Six years after starting as a place for freelancers and small entrepreneurial firms, WeWork in 2016 switched its focus to wooing the world's largest employers. Many signed on.

From September 2016 to September 2017, WeWork's enterprise member segment increased more than 370 percent, and corporate members make up more than 25 percent of WeWork's total membership. Also, 25 percent of the Fortune 500 firms are WeWork members.

But something got lost in the middle -- those 1.1 million mid-sized businesses that wanted something different. This week, coworking firm said it is creating HQ by WeWork to focus on companies that employ 11 to 250 and seek offices with privacy, identity and flexibility.

HQ by WeWork plans to offer companies a different setup than the company's initial coworking and shared office spaces that centered on a central common area with desks and offices in plain view for solo freelancers and very small firms. The idea then was to fulfill entrepreneurs' desire to be part of a community, even if their company had only one or two workers.

Then, about two years ago, WeWork shifted a large chunk of its focus to enterprise companies, those with string balance sheets and credit who would occupy larger numbers of desks. Since then, WeWork's enterprise business emerged as its fast-growing segment.

As the coworking firm continues to grow and seek additional revenue streams on its path to an expected initial public offering, it realized it needed to cater to those 1 million-plus mid-sized businesses that employ 30 million people. What WeWork has since learned, it said, is that some of these companies haven't considered WeWork because their needs are different from small and enterprise firms.

WeWork found that these companies desire privacy, identity and flexibility, according to a blog posted by WeWork Chief Growth Officer Dave Fano on Wednesday. While the company has always counted medium-sized firms as members, it realized it could be doing more to cater to their specific needs and attract more of them.

First, WeWork found mid-sized firms between one- and two-person shops and large enterprise companies want privacy, something hard to find in its traditional locations. "You want a space that is all yours, where your team members sit amongst their colleagues, collaborating and performing their best," said Fano, speaking from firsthand experience as one whom previously served as chief executive officer of a firm with 60 employees.

WeWork competitor Serendipity Labs of Rye, NY picked up on the privacy trend early and designed its coworking offices with frosted glass. It offers more of "a grown-up coworking environment," the company said. In Nashville, Serendipity's Ideation Labs windows have frosted glass to offer some privacy.

“From our start we have incorporated privacy into our design, including elements like true walls in between each office providing sound attenuation and added privacy for each of our members,” a Serendipity Labs spokesperson told CoStar News in an e-mail.

Second, mid-sized firms seek identity. To this end, HQ by WeWork will offer white-label locations on standalone floors devoid of shared-member spaces and WeWork branding. These WeWork members can brand theirs spaces without having employees from other firms milling around.

The third thing WeWork found mid-sized companies desire is flexibility. For some fast-growing startups and other new companies, it's hard to predict their office space needs five and 10 years out, so they tend to avoid long-term leases. Instead, they desire the flexibility to increase or decrease their space requirements without being penalized or left scramble for additional desks.

WeWork's agreements offer more flexibility than traditional longer-term office leases that penalize firms for downsizing or shuttering their operations. Moreover, it could be impossible for fast-growing companies to grow in place if an office building has little to no vacancy or is filled with tenants that have rights to existing available space.

Additionally, the firm plans to offer design and construction services "that would allow medium-sized business owners to focus on running their businesses rather than their offices," Fano said in his blog post.

Tony Wilbert, Atlanta Market Reporter  CoStar Group   
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