WeWork And The Future Of Coworking
STEVE INSKEEP, HOST:
The success story of the coworking company WeWork recently became a cautionary tale. From an estimated $47 billion company, its value has plunged after investors took a close look at the company's books and lost confidence in what they found there. WeWork's major investor SoftBank stepped in to make structural changes.
So what does all this mean for the company? And what does all this mean for the future of what's called coworking? Here are Stacey Vanek Smith and Cardiff Garcia from NPR's daily economics podcast The Indicator from Planet Money.
STACEY VANEK SMITH, BYLINE: The office - it's boring. It's beige. It is full of drones in suits who are just counting down the days until retirement. And then came WeWork. WeWork was not boring or beige. It was this whole new way to see work and to see the office.
CARDIFF GARCIA, BYLINE: WeWork rented out office space in cities all over the world and even became the biggest tenant in New York, Washington, D.C., and London. Earlier this year, the company was estimated to be worth $47 billion. And a lot of competitors cropped up, but WeWork was the 500-pound gorilla. Its name was synonymous with coworking.
VANEK SMITH: And then people took a closer look at WeWork's books.
GARCIA: And investors freaked out. The company's estimated value was slashed from $47 billion to $8 billion. SoftBank, which has bankrolled a lot of WeWork's growth, took control of the spiraling company.
VANEK SMITH: Amol Sarva is the CEO of a company called Knotel, which, he would like to stress, is not in the coworking business.
AMOL SARVA: We're a flexible workspace platform. It's...
VANEK SMITH: (Laughter).
SARVA: ...In the general category of office.
VANEK SMITH: Basically, Knotel does compete with WeWork.
GARCIA: Yeah, though Amol does say that they have different specialties. WeWork mostly creates these big, hip spaces that fill up with freelancers and small businesses. Knotel pretty much only works with big companies.
VANEK SMITH: And it will probably benefit from WeWork's implosion, though Amol says probably not from the freelancers and small startups part of that business. In fact, he thinks that part is on its way out.
GARCIA: Because, Amol says, most people are not entrepreneurs or freelancers or working for tiny startups. Most of us just work for big, boring companies.
SARVA: A number that has been increasing for decades because of technology, globalization. The biggest companies are getting bigger. And so as much as you sort of feel that there is this bubbling economy of small enterprises, they will either get big or go away.
VANEK SMITH: In the last couple years, WeWork did start to target bigger companies, like Microsoft and Facebook. Around a third of WeWork's tenants are big companies, but the lion's share of its tenants are still individuals and small businesses.
GARCIA: Yeah. Big companies, on the other hand, tend to make for more stable tenants. And also, they just have more money. And that more money part is especially important, says Amol, because the amount of money you need to spiff up an office space is actually kind of crazy.
VANEK SMITH: A WeWork space here in New York costs around $500 a month, and that is just for access to the lounge-y common room area. If you want an actual office, it's more like a thousand dollars a month.
GARCIA: And this could be where WeWork's focus on freelancers and tiny startups is going to sting. A lot of those workers are extremely price-sensitive, and they have much cheaper options. And if those customers react to WeWork's higher prices by choosing one of those alternative options, WeWork could end up struggling even more.
VANEK SMITH: And with it, the whole premise of the WeWork economy - of this whole new idea, this new dream of what working meant.
Stacey Vanek Smith.
GARCIA: Cardiff Garcia, NPR News.
(SOUNDBITE OF ARMS AND SLEEPERS' "UNSHIELD") Transcript provided by NPR, Copyright NPR.