WeWork Spotlight Urges Servcorp Into U.S. Expansion

Hot off the back of WeWork’s links with Japan’s SoftBank Group, which could see fresh investment into the workspace brand to the tune of $3billion, established serviced office operator Servcorp is now reportedly pushing for U.S. expansion.

As reported by Reuters:

Servcorp, an Australia-based rival to WeWork, believes the market is ripe for expansion and is sending its chief operating officer to New York with a goal of doubling U.S. operations, 22 locations, in about five years.

“WeWork has really brought into the spotlight the fact that the flexible workspace is a fantastic solution, particularly for start-ups,” said Marcus Moufarrige, COO and the founder’s son of Sydney-based Servcorp, a leader in serviced office space and meeting rooms in Asia, the Middle East and Australia.

Moufarrige said in a telephone interview he would relocate to the United states by the end of the month.

Servcorp has 155 locations in 54 cities across the globe, while WeWork has 154 locations in 36 cities. Their styles differ, with WeWork geared to millennials and Servcorp serving the professional business class.

CNBC on Monday cited a source who said SoftBank was close to a $3 billion investment in seven-year-old WeWork. On Jan. 30, the Wall Street Journal cited sources saying the Japanese firm was “weighing an investment of well over $1 billion.

“A deal with SoftBank would likely help WeWork jump through the hoops involved in entering the Japanese market. However, the company’s financial restraints as reported last year may pose hurdles, along with lack of a unique technological edge that the Japanese company typically seeks.

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Any further funding in WeWork may indeed “mark a major vote of confidence in the business and the sector overall” and help pave the way for the roll-out of flexible workspace in Japan.

However, the report highlights the concerns of “risky” lease agreements. Not for the first time, questions are being asked over WeWork’s valuation and financial model with some industry and commercial real estate experts believing it to be unsustainable, particularly given the company’s relatively short track record.

Parallels have been drawn with more traditional flexible workspace companies such as Regus and Servcorp, both of which benefit from an established infrastructure and many more years of trading.

Reuters continues:

Moufarrige said Servcorp has an edge with its global footprint and a telecommunications network that connects all its sites on a seamless platform. He called the United States the company’s biggest opportunity.

WeWork’s rapid expansion, and its reliance on start-ups as customers, has raised the question of what happens when the economy softens. WeWork reports it has increased the number of larger companies that rent space from it. Servcorp appeals to established companies … Along with a more flexible workspace businesses are going to demand better and more robust technology, Moufarrige said.

Read the article in full here.