IPO valuation aside -- it is premature to write the WeWork model off
It could end up being a strong counter-cyclical model -- and outperforms as the economy tightens
Traditional office space is a 2, 5, 10 year commitment and a pain to move things around -- with WeWork you're paying monthly and relocating geographically is simple
CFOs will often look to pay more per month for shorter commitments which fit well with budgets and can be terminated quickly if situations change
WeWork also makes setting up an office in a new region super simple vs contracting with local landlords
I don't think anyone's writing the model of "lease office space on flexible short term basis, including by the desk" off. But the many other companies doing it without free beer, self-dealing and Ponzi scheme approach to growth and valuations are probably better placed to weather recessions...
I'm sorry I've heard these claims but I'm strongly sceptical. WeWork source their office space on long term contracts and lease them on short term contracts. So in order for them to make more money during a recession there needs to be an increase in demand for office rental space during a recession. Even if that does occur, a competitor could come in and rent some of the office space freed up by the recession and out-compete wework by having lower costs. That's best case. In reality, in a recession companies look to lower their cost - the first people they'll get rid of is the high cost wework spaces, consolidating employees into larger regional offices (which traditionally has the side benefit of lowering headcount). No one is increasing their high cost offices during a recession.
In a bull period, you're right, CFOs will be willing to spend a little more on high risk projects to allow them to mitigate the risks of long term contracts, but that's not what happens during a recession. During a recession they're overwhelmingly looking to demonstrate a lean, low cost company to shareholders.
Like many of the wework stories, it'd be nice if it were true, but it's just simply not very likely.
And to the degree that We Work gets used as a "working from home" option, I expect that in any sort of crunch, many of those people will be told to just, you know, "work from home" and rent conference room facilities etc. on a daily basis as needed.
If everyone moves from long-term office spaces to short-term ones, at the same time that overall office demand declines, then the price of traditional office space is going to crater... taking with it the price (or demand) of WeWork space, which is already not exactly operating at the best margins ever.
It could end up being a strong counter-cyclical model -- and outperforms as the economy tightens
Traditional office space is a 2, 5, 10 year commitment and a pain to move things around -- with WeWork you're paying monthly and relocating geographically is simple
CFOs will often look to pay more per month for shorter commitments which fit well with budgets and can be terminated quickly if situations change
WeWork also makes setting up an office in a new region super simple vs contracting with local landlords