WeWork courts big corporations as coronavirus slams startups
Large companies made up more than half of core revenue for first time in Q2
Despite its roots as a landlord for freelancers and startups, WeWork has spent the past several years pivoting towards larger “enterprise” tenants. The co-working firm’s new CEO, as well as the economic fallout of coronavirus, are now solidifying that trend.
For the first time ever, companies with more than 500 employees accounted for more than half of WeWork’s core revenue in the second quarter, excluding operations in China and India, the company said.
“If you want to continue to grow faster, the additional demand comes from enterprise businesses,” CEO Sandeep Mathrani told the Wall Street Journal in an interview.
Smaller venture-backed tenants have been giving up co-working space at a rapid pace since the coronavirus pandemic began, which has contributed to the growing importance of large tenants.
Accounting firm Kruze Consulting says that about half of its venture-funded customers with WeWork memberships got rid of their space between December and June, while another 26 percent have reduced their space.
A former Vornado Realty Trust executive and CEO at mall operator General Growth Properties, Mathrani now focuses on pitching the advantage of flexibility to larger corporations as they reconsider their office space needs.
Access-management company Okta is one of the enterprise customers seeking such increased flexibility as it hires remote workers across the country.
“There’s a set of employees that are not going to be near an office and that are not going to have a great work-from-home setup. And I think that’s where a co-working or serviced-office provider comes in,” Okta’s senior vice president of global workplace services Armen Vartanian said.
The pandemic has had a severe impact on WeWork’s finances, although the firm says it is on track to become profitable by the end of next year. Social distancing in offices may present another challenge, as WeWork rents real estate by the square foot but sublets it by the desk. [WSJ] — Kevin Sun