WeWork’s implosion could be the hard reset needed for the co-working industry.
“We didn’t really estimate the magnitude of what that fallout meant for Industrious and throughout the industry,” said Katherine Lau, senior director of real estate for flexible space firm Industrious. “What we see is a normalization of the growth rate of co-working. In many ways, WeWork propped up the real estate markets, drove up rents and drove down vacancy. We’ll see what the real estate markets are really made of in 2020.”
Lau joined Bridgid Coulter, founder and CEO of Blackbird House, a co-working space for women of color, and Jim Doorn, executive vice president for IWG’s western division, on Wednesday for The Real Deal and Spaces’ panel discussion on the state of co-working in the L.A. market.
Hiten Samtani, TRD’s associate publisher, moderated the discussion, which was held at Spaces’ Playa District location at 5999 Center Drive. Over 300 people were in attendance.
The WeWork meltdown –– in which the company’s enigmatic CEO was ousted, its valuation slashed from $47 billion to $8 billion, and about one-third of employees in line for layoffs –– was front-and-center on the minds of the panelists.
“It’s really made the operators say, ‘Man, I’ve got to button up. Man, I’ve got to do this a little better and make money,” said Lau. “That been our M.O. at Industrious since our inception in 2013. We feel we are well positioned for that.”
Lau said New York-based Industrious, which has raised more than $200 million in funding from venture capital firms such as Fifth Wall Ventures and real estate firms like Brookfield Properties, is projecting profitability by the end of 2020.
Doorn said IWG, a major rival of WeWork that operates brands such as Regus and Spaces, has benefited from the dramatic rise of co-working. His company is profitable after surviving the last downturn, has a market cap of $3.5 billion, and sports half-a-dozen locations in Southern California.
“When I think of what the customer needs and what we started with, we are seeing a significant demand of flexibility,” he said. “We also are seeing customers want stability.”
Coulter didn’t see a direct impact on Blackbird from the WeWork meltdown.
“We are absolutely in a different market,” said Coulter, noting that her firm’s single co-working space in Culver City, which is a hub for entertainment and media startups, targets women of color.
“We are really building a brand from the community up. Our mission and motto is to be of service in a very specific way in to a demographic way,” she said. “We are positioning ourselves to be a different model.”
Coulter, an actress and interior designer – and wife of Don Cheadle – said her co-working club includes a podcast studio and fitness classes. It even hosted an event with Democratic presidential candidate Kamala Harris this fall right before Blackbird’s official launch.
Lau and Doorn also are seeing some Fortune 500 companies show interest in becoming tenants, looking at potentially shifting departments such as IT into their spaces.
Lau, meanwhile, said that her firm is trying to monetize “outdoor space” at some of its locations – such as with outdoor exercise classes or bringing in food trucks.
Coulter said she’s been surprised to see interest in everything from podcasters to sewing classes. “These are unique things I just didn’t expect.”