The co-working company sells a somewhat uneasy combination of capitalist ambition and cooperative warmth.
In March 2017, Atlantic Media’s New York City-based editors and writers moved to a WeWork office in Brooklyn. I remember our first morning vividly: It was like entering the Millennial id. Craft beer and cucumber water poured from kitchen taps. Laptoppers in jeans and toques clacked along to MGMT in the wood-paneled common area. A WeWork “community manager” showed us to a glass-walled office so small that my colleagues and I could clasp hands while seated. We sat. Had we arrived in the future of work?
Atlantic Media told us this arrangement would be temporary while our real office was renovated. As of this writing, we’re still here. If WeWork had its way, we’d stay forever, along with much of the 21st-century workforce.
WeWork is the world’s leading co-working company and the sixth-most-valuable start-up, according to VentureSource. Last year it was valued at $20 billion, a staggering sum for a company renting out short-term office space, mostly to small businesses and freelancers. But like Uber and Airbnb, WeWork positions itself grandly, as a disruptive revolutionary. It promises to “humanize” work, making the office a more creative place, with the right lighting, the right snacks, and, crucially, the right people.
WeWork would say it’s well on its way to transforming white-collar labor: It seats 175,000 “members” in 207 locations across 20 countries, with plans to double in size this year. Its leaders describe it not as a real-estate venture but as a “community company.”
Whether that’s a $20 billion business, however, is a matter of contention. Companies specializing in shared office space have come before. As The Wall Street Journal noted this fall, the office-leasing company IWG manages five times the square footage but has about one-eighth the market value. Even Adam Neumann, a co-founder of WeWork and its CEO, admits that his company is overvalued, if you’re looking merely at desks leased or rents collected. “No one is investing in a co-working company worth $20 billion. That doesn’t exist,” he told Forbes in 2017. “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”
That’s a striking statement. Shuffleboard tables and free IPAs, however enticing, surely can’t justify the recent $4.4 billion round of venture capital propelling the company’s growth. But these cramped quarters may hold more than meets the eye. WeWork’s real value might indeed be in the elbow-to-elbow “energy” Neumann describes—just not for the community you might imagine.
The office sublet is not an innovation of the digital age. But the idea of a co-working space—a collection of like-minded renters committed to forming a community—is a more recent development. Its history might begin with the European hacker spaces of the 1990s, where independent programmers swapped coding skills in dark basements with an air of techno-anarchism. Americans caught on a few years later. The first true co-working space, so-called, emerged in 2005, renting square footage from a feminist collective in San Francisco’s Mission District. This eventually became the Hat Factory, an industrial loft in the Dogpatch neighborhood, which described itself as a “community office space for geeks and media hackers.” It was co-founded by the guy who invented the hashtag.
The first wave of co-working served a relatively small, scrappy set of independent contractors and do-gooders. The second wave has responded to an economy in which independent work has become more default than choice. The 2008 financial crash forced employers to cut hours and jobs, and the emerging gig economy swelled the ranks of the self-employed. Thus WeWork’s eclectic mix of freelance writers, labor organizers, financial consultants, and app developers hustling for investors.
Adam Neumann was himself a struggling entrepreneur (he owned a company that sold baby clothes) in recession-era New York when he and a couple of friends rented out space in a Brooklyn building to make some additional income. Demand proved stronger than expected. In 2010, Neumann, who was raised in part on a kibbutz in Israel, and Miguel McKelvey, who grew up with five mothers in an Oregon collective and studied architecture in college, leased a few thousand square feet in SoHo and opened the first WeWork: a shared space where enterprising creatives could work and play.
From the start, WeWork offered a somewhat uneasy combination of its founders’ ambitions and co-working’s communal roots. Neumann describes WeWork as a “capitalist kibbutz.” Members are encouraged to mingle, network, and leverage one another’s talents, frequently under the auspices of a corporate sponsor: Witness taco pop-ups promoting internet phone service; talk-therapy circles sponsored by a women’s activewear brand; cocktails served up by the payroll-software giant ADP. Billed as community-building programming, the events can feel more like exercises in targeted advertising, with members as the marks. Genuine connections do occur—sometimes at happy hours and often through WeWork’s online member network, where people share marketing tips, sell furniture, organize cryptocurrency seminars. (The variety of requests never ceases to amaze. Quickly fulfilled: “Any WeWork salted cured meat companies?” Apparently unfulfilled: “Can anyone refer me to a good venture capitalist in the NYC area?”)
Despite the company’s occasional excesses, WeWork offices are more pleasant than many a soulless cubicle farm, according to people I spoke with at locations in New York; Washington, D.C.; Boston; and Los Angeles. “People are relaxed. No one’s watching the clock,” says Liz Granda, who works for Brooklyn Paws, a concierge service for pet owners, in a WeWork under the Manhattan Bridge. The relentlessly cheerful vibe encourages members to be social, or at least forces them to be nice. Nicole Shore, the principal of Zero to Sixty Communications, a boutique PR firm, has rented desks in locations around the country. She told me she got to know her go-to graphic designer at a WeWork Christmas party. At its best, with its abundant conveniences and event-directing community managers, WeWork can feel like an all-inclusive cruise.
Cruises, of course, aren’t for everyone. Many observers in the real-estate industry say WeWork is wildly overvalued, and its aggressive expansion plans unrealistic. Although it has reportedly begun raising money for a real-estate-investment fund, the company owns few physical assets. Its practice has been to sign long-term leases en masse, striking multiproperty agreements to get the best deals with landlords, then renting spaces at a premium. (Many members told me that, per square foot, WeWork is considerably pricier than a traditional rental, but that they’re willing to pay extra for the turnkey flexibility and sense of community.) It’s a classic lease-arbitrage model, which business-school professors will tell you carries significant risk: Whenever the next economic downturn hits, demand for office space may retreat, leaving WeWork with a lot of empty desks and multiyear leases to pay.
Investors have seen this movie before. IWG, itself a network of flexible office spaces, expanded rapidly in the 1990s (it was known as Regus at the time) on a wave of high-hope investment, only to seek bankruptcy protection after the dot-com bust. What distinguishes the younger player, really, besides charismatic leadership and lofty rhetoric? “WeWork is nothing but Regus with a paint job,” one industry veteran told The Wall Street Journal. Many investors have placed their bets because they’re dazzled by Neumann, Konrad Putzier, a real-estate reporter at The Real Deal, told me.
Wework may be positioning itself more strategically than some of its detractors allow. More and more of the people inside the glass-walled grids are not entrepreneurs or gig workers. They’re employees of Facebook, Amazon, General Electric, IBM, Bank of America, and hundreds of other large corporations. Blue-chip companies are the fastest-growing segment of WeWork’s client base. Their employees now represent more than 25 percent of WeWork members.
At WeWork, companies with more than 1,000 employees globally are known as “enterprise” members. Veresh Sita, an executive who oversees products for this group, told me that many enterprise members first looked to WeWork for temporary overflow space or as an outpost in a new market. Now WeWork is actively courting them. “Our concept is ‘Come for a month, stay for life,’” Sita said.
The benefit that big companies offer WeWork seems clear: Salesforce, HSBC, and Facebook are presumably more reliable subtenants than a fluctuating mix of long-shot start-ups and quixotic nonprofits. What do corporations get in the deal? WeWork estimates that enterprise members save 25 to 50 percent in operating expenses, compared with traditional office build-outs. But members told me it’s less the cost, and more the convenience and cool factor, that draws them in. Big, buttoned-up companies aren’t always good at providing the kinds of perks and services many workers have come to expect. “We’ve become a talent feeder for the rest of the company,” says Adam L’Italien, the vice president of global consumer markets innovation at Liberty Mutual Insurance, which leases space at a Boston WeWork. “We’re able to show people we do things that are less obvious when you think about Liberty and insurance products.”
WeWork offers more than just a chiller vibe. In a 2016 trial run, Microsoft gave 300 salespeople in three U.S. cities access to WeWork spaces as an alternative to their existing offices in those cities. After a few months, more than 80 percent of the workers reported that the access made them more productive throughout their day.
WeWork is selling enterprise members on the idea that it can make their workers more productive still. Sita told me that WeWork plans to sprinkle offices with data-harvesting sensors and facial-recognition software as part of its “Powered by We” suite of services. The program will allow WeWork to monitor how employees use its spaces: how they adjust their desks, where in the office they spend their time, and maybe even how engaged they are in meetings. These data—which, according to WeWork, would never be used to track the movements of individual employees—could allow companies to lease exactly the right amount of space, and exactly the right kind of space, too. Phil Kirschner, the director of workplace strategy, describes a future in which someone could check into any WeWork in the world and sit at a desk that automatically adjusted to the right height.
Until that creepy, if ergonomically correct, future comes to pass, the benefits that WeWork confers on enterprise members may come from a tried-and-true real-estate verity: It’s all about location. Microsoft employees noted that WeWork’s scatter plot of primo sites gave them more-convenient access to clients. Other enterprise members have benefited from new neighbors within WeWork’s walls. The accounting giant KPMG has a 50-desk space in a Manhattan WeWork. Leaders say one of the greatest advantages has been access to the entrepreneurial talent of WeWork members. David Pessah, the director of KPMG’s Innovation Labs, previously worked at a Snapchat-esque start-up in the same WeWork. Repeated run-ins and informal chats with his now-boss led to a job offer. “I’m not sure if I would have applied to KPMG, or been interested in the same capacity, if not for the WeWork environment,” Pessah told me. “It was an easy transition.”
Sita said WeWork will soon begin offering some enterprise members the ability to manipulate, to an extent, who works in a given location. He offered an example: Say a large pharmaceutical brand wants to work with biomedical start-ups. WeWork would seek out congenial neighbors by tapping willing members or interested recruits. “Every start-up wants to be an enterprise, and every enterprise a start-up,” Sita said. “We think we have a responsibility to curate some relationship between these two groups.”
The upshot of such an arrangement is not just the stuff of WeWork’s corporate talking points. Prominent 20th-century urban theorists like Jane Jacobs and the economist Robert Lucas argued that dense packs of talented workers boost local economies and innovative thinking; recent data-backed research supports the theory. In a way, WeWork is taking the “creative clustering” already happening in cosmopolitan centers and concentrating it even further, in a few thousand square feet of class-A office space.
What does that mean for the average co-worker? WeWork will try to “balance” the mix of members by location, Sita said. He stressed that start-ups can benefit from proximity to blue chips, whether through knowledge-sharing, contracting, or even acquisition. That makes sense, at least in some cases. But a future where co-working is made entirely of big fish and little fish content to swim in one transactional bowl is a future that seems to leave out a lot of other fish: the vegan-meal-kit makers, the community bail fund, and hey, the journalists. We, too, are working here. What would Big Business want with us? And what would we want with Big Business? The day may soon come when we’re forced to repair to our dark basements—because the economy cools off, or because WeWork has cooled on us.
This post originally appeared on The Atlantic.