Aniket Dutta
Rework The Coworking Space Aniket Dutta


The commercial office market size globally runs in trillions of dollars owing to the role of cross-border investment policies and macroeconomic factors at large (say globalization).

For decades the commercial office markets were run by conventional brick-and-mortar “watertight” developments leased out to occupiers — very, very limited in terms of building an environment. Coworking stems from an unconventional approach towards work where people, as a workforce, thrive together as a community. There’s collaboration over coffee; there are no strict boundaries in between. It’s a way of working, and not a workplace.

Maybe that’s why there is no hyphen in Coworking.

The concept has been doing the rounds in the market during the globalization 3.0 period, but the boom took place post the emergence of the start-up culture, because why would conventional developers consider fledgling businesses which might not exist tomorrow seriously? Why would a risky business look for a permanent space at all? Coworking space, you see, exists amidst such requirements.

Key players have been Regus, and the sensational, WeWork. Globally, Regus accounts for 11% of the market share, while WeWork accounts for 1.7%. The coworking space market is largely dominated by local operators (86% of market share). In terms of market size, the coworking space market is appx $26 billion, and likely to grow by leaps and bounds.

Talking of giants, WeWork is changing the landscape in the coworking space segment. Driven by investments from private equity firms, WeWork seeks to present a tech-savvy workplace to the world. Acquiring bleeding-edge tech solutions, employing analytics to read consumer behavior and customer needs, WeWork has set a glaring example of how tech can potentially penetrate real estate. It’s not WeWork anymore, it provides a living solution now — from living, workplace to schooling, and hence the name, The We Company.

Regus has been there for decades in the market and takes a utilitarian approach — it’s simply utility-driven office space provider for shorter lease periods. It uses a franchise model for the business. This involves less capital expense and rapid scalability. Regus turns out to be profitable (rather the only profitable player) in the sector.

As for WeWork, the recent fiasco on IPO launch accounts for its overinflated valuation at $47 billion (like a tech company) owing to its swanky, apparently tech-driven spaces. However, it boils down to the actual service or product it offers — i.e., subleased workspaces.

WeWork largely works on the rent-arbitrage model. Given the fact the company believes in rapid scaling, it hasn’t turned out great for the business until date, as numbers reflect performance in red. As per 2018 reports, 600,000 seats are operating globally, yielding a revenue of $1.8Bn; the ARPU comes out to be $3,000 per seat. Net operating profit can be assumed to be 40%, thus making $1,200 per seat (and the rest as non-operating profit, i.e., $1,800). Net losses registered were appx. $2bn; assuming 45% is contributed towards operating and admin related expenses, the rest (i.e., $1.1Bn) is broadly incurred in business expansion. Therefore, the company is roughly looking at an additional market footprint of 1.1Bn/1800 = 620,000 seats, which is likely to yield $2Bn additionally. In total, the business is likely to fare at 5x times lesser than the valuation of $20 Bn, while Regus trades at 1.08x the revenue.

So, here are the two glaring business models that run in contrary ways. While Regus turns out to be profitable but adds no value to the ecosystem, The We Company has built a brand for itself.

Questions I leave for discussion:

  • What do you think of WeWork’s future? What adjustments can create tangible value for the brand?



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