WeWork made its name renting shared office spaces to startups and other small companies in trendy buildings with fruit water and ping-pong tables. But in a bid to lure larger and more mature clients, WeWork is testing a new business proposition: offices for companies that, when it comes to the workplace, don’t actually want to share.
In recent months, WeWork has begun providing design, construction, and management services to “enterprise” clients who want a workplace with the company’s signature amenities and flair, but would rather pay WeWork to customize their space than lease one of its shared offices.
“What we’re seeing is that large companies want to be small,” Dave Fano, WeWork’s chief product officer, told press at a breakfast in downtown Manhattan this morning. “What they really want is that space as a service,” he added, riffing on “software as a service” (SaaS), a popular bit of jargon in the tech industry to describe software that’s licensed on a subscription basis rather than owned. “Community managers, fruit water, coffee—they get the full experience.”
WeWork decided to test an enterprise option after noticing that several companies had booked entire floors in its existing locations, effectively carving out their own offices. WeWork currently has 30 floors among its more than 135 locations that are rented out by single clients, or “members.” It has five buildings with only one or two occupants. One of them, an unnamed company in Chicago, reduced its leased space to two floors from three with WeWork’s assistance. Real estate site The Real Deal also reported this afternoon that IBM has inked a deal for all eight floors occupied by WeWork in a building near Manhattan’s Union Square, and is set to move 600 employees to the space.
WeWork has always been deeply involved in the design and management of its office buildings. The offices have a purposeful Silicon Valley vibe, with glass walls, wood-paneled floors, and industrial accents. They’re designed to create a sense of community, a popular WeWork talking point, but also to be maximally efficient. “We’ve thought obsessively about the right dimensions for a conference room,” Fano joked. The company recently received a $300 million investment from Japan’s SoftBank and is valued at more than $17 billion.
That valuation is largely tied to WeWork’s ability to brand itself as more than just another property management firm. As the company takes on a more obvious design and development role, it’s wary of being labeled a glorified facilities manager. “We’re not ever just going to do design and construction services, that’s not for us,” Fano said. “What we really want to do is reinvigorate the culture.”
He added that WeWork isn’t focused on making a profit on development work it does for corporate clients. “We don’t want to make money on that,” he said. “We don’t want to lose money on that, but we’re really just letting them leverage our design and construction.”
A lot of the details still need to be hashed out. For now, WeWork is thinking about custom builds and on-site services for companies with 50,000 to 60,000 square feet and at least 1,000 employees. It would also aim to sign these clients to three- to five-year contracts. That’s a much greater commitment than WeWork asks from its typical member, who can rent a desk or office month-to-month. A rotating “hot desk” starts at $220 a month and a private office at $400 a month. WeWork leases and refurbishes its properties, but doesn’t actually own them.
WeWork believes there’s a market for “space as a service” among companies that aspire to be more startup-like, even if they don’t want to share their workplace. “Companies are looking to be asset-light and commitment-free, so that they can be nimble,” Fano said. “Space is the full environment. It’s experience as a service, culture as a service. And we see all of those as a subset of the space.”