Specialist
Former Global VP, Real Estate at WeWork Companies Inc
Agenda
- Operating environment for WeWork, including potential demand for office space in a return-to-work environment, including the shift from a lease and sublease to a revenue-share model
- WeWork’s competitive positioning and relative differentiation vs Industrious, IWG (LON: IWG) and others, and the threat of landlords creating co-working or more flexible workspace environments
- WeWork’s location-level economics and projected occupancy and growth goals over the next 3-5 years
- How do we think about typical unit economics of WeWork locations and the potential slope of recovery in occupancy and revenues?
- Outlook for 2022 and beyond and the company’s longer-term profitability prospects
Questions
1.
What key trends or drivers should we track across the operating environment for WeWork and other coworking companies?
2.
What is your near-, mid- and long-term demand outlook for co-working space as employers potentially seek to get employees back into the office? Obviously, the pandemic shifted how and where we work.
3.
How should we frame the available supply of co-working space and how that might trend? How have the various co-working companies adjusted their footprints amid the pandemic?
4.
You’ve suggested there will be more demand for co-working space, while supply has been somewhat
rationalised. What is a more steady-state outlook for occupancy trends across all co-working companies and for WeWork specifically?
5.
How are you assessing the shift from the original lease and sublease model to more of a revenue-share model with the landlord? What are the implications for market participants such as WeWork?
6.
What percentage of the total supply of co-working space is the traditional lease and sublease vs the revenue-share model, and how might that trend over the next 3-5 years?
7.
What are the location-level economics for a typical WeWork space, and how would that compare by the lease and sublease vs the revenue-share model?
8.
What’s a typical per-location CAPEX for an initial build-out? You noted costs such as community manager and tech. How should we frame costs by actual value or as a percentage of revenue for a location?
9.
What’s the typical break-even occupancy rate for a location, appreciating it varies by market?
10.
How should we assess potential occupancy trends for WeWork over the next one, three and five years? There was the announced SPAC transaction turning WeWork public earlier this year. It shared projections
around hitting 70% in the physical occupancy, and being EBITDA-positive by EOY 2021 from an adjusted basis. All of that was pre the Delta wave and the continued holdback of return to office.
11.
Where would you expect WeWork’s occupancy rate to level out?
12.
What’s the ultimate number of locations WeWork can profitably expand into in the near-to-mid-term?
13.
WeWork has historically discussed the potential for additional services beyond space-as-a-service. We
noted tech services, and it’s launched events production and HR services. How should we frame the opportunity for additional revenue lines and the extent to which that contributes to member stickiness?
14.
Could you broadly outline the economics of white labelling from WeWork?
15.
Could you break down the competitive landscape and the positioning of key players such as WeWork, Industrious, IWG and Knotel?
16.
You indicated WeWork is the only player among its cohort with truly global scale. Could you elaborate on
the importance of scale, whether by number of locations, markets or other metrics? How should we bifurcate it between larger enterprises – where that’s likely more of a factor – and SMBs looking for space?
17.
Does competition differ across sizes? It seems many players offer a sub-25,000-square-foot scale, but not
many besides WeWork pursue the north-of-75,000-square-foot locations. What’s constraining other players
from pursuing large locations?
18.
Landlords with a more established global footprint have presumably been given back a lot of floor space.
Why wouldn’t the landlords themselves just do this or take over leases and build out more of their own coworking or flexible-lease-type model? To what extent is that taking place and how might that trend?
19.
Do you expect the competitive landscape to act more rationally than it did pre-pandemic? If so, what does
that mean for a new, more normalised growth rate for some companies?
20.
Is there potential for other new entrants – having indicated you don’t expect much competition from the landlords – or do you expect it to remain WeWork, Industrious and a few others?
21.
What’s a best-, worst- and base-case scenario for the industry over the next three, five and 10 years? Are
there any longer-term wildcards that could materially impact dynamics?
22.
Are there any projections from WeWork’s management that you’d encourage us to potentially challenge?
23.
Could we conclude with your summarising assessment of WeWork and its prospects?
