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Jonathan Price – CRE & Flex Expert
- WeWork is once again attempting to poach clients from rival operators.
- A mass mailer offers “exclusive” free trials, but it always pays to read the fine print.
- This tactic hints that WeWork could be having trouble filling space, and warns of potentially more aggressive pricing strategies to come.
In early March, WeWork launched a massive marketing campaign. Offers were sent via email and LinkedIn Mail on behalf of CEO Sandeep Mathrani, with the following subject line: “WeWork exclusive offer for you”.
The LinkedIn Mail offer read as follows:
With today’s uncertainties, WeWork is planning for a future built on flexibility. We’re here for you—and we’re here to stay. Our flexible deal terms and turnkey, full-floor offices help reduce CapEx and make it easy for you to provide a great work experience to employees, wherever they may be.
To help your business move forward, we have an exclusive workspace offer for you if you make the switch to WeWork from your existing office provider.
- Try a private office space with no monthly charge through March 2021.
- It you’re ready to make the switch, we’ll match or beat your current space provider’s price through the end of the deal.
- In addition to your office, teams can work closer to home with complimentary access to workspaces across hundreds of locations through June 2021.
- Terms apply.
As we look ahead to a post-pandemic world, WeWork is here to help your business adapt to tomorrow’s needs, today.
To take advantage of this offer, call 646-XXX-XXX to speak with our specialists or learn more at we.co/switch.
Sandeep Mathrani
CEO WeWork
With any offer, it always pays to read the fine print.
Here are some of the terms and conditions that apply, which may make you think twice before taking WeWork up on their offer:
- A service retainer is required.
- The offer only applies to private offices.
- WeWork may modify or terminate the offer without notice or warning.
- The office pricing that matches or beats your current provider’s pricing only applies to December, 2021—afterwards you would need to pay WeWork’s full price.
- Some locations are excluded from access to “hundreds of locations”.
Been There, Done That
This isn’t the first time WeWork has tried to poach clients from competitors in the hopes of filling up its coworking locations.
Back in 2017, Allwork.Space reported that WeWork was cannibalizing the industry through a variety of tactics, including:
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- Offering 50% off for clients that made the switch to WeWork—they went as far as targeting the CEO and founder of a rival company.
- Bait and switch—WeWork offered a discounted price during tours and marketing campaigns, but made no mention of the deal in the contracts that potential members had to sign.
- Paying 100% commission to brokers that poached clients from rivals, including Knotel, Industrious, and IWG.
Given what we already know, this new “exclusive offer” shouldn’t really come as a surprise.
Yet, it does.
When WeWork hired Sandeep Mathrani as CEO following the ousting of Adam Neumann, many believed a new era would start for the company. After all, Mathrani is an experienced real estate veteran, with a great track record of turning around companies dealing with debt.
His background in real estate also hinted that WeWork was finally coming to terms with the fact that it is a real estate company, rather than a tech company.
During his first months as CEO, Mathrani took actions that focused on reducing costs and expenses. He laid off thousands of employees, got rid of side businesses (WeGrow, WeLive, Teem, etc.), and closed several underperforming locations.
A couple of weeks before he officially started, Mathrani stated that WeWork has “significant potential if we stick to our shared values.”
A few months after taking over as CEO, Mathrani stated in an interview with Bisnow:
“We will continue growing, but the focus will be on profitable growth. It will be a balanced expansion.”
And yet, this new era for WeWork—under the leadership of Mathrani—seems to continue taking out strategies from Neumann’s book. Who knows, maybe poaching clients is part of WeWork’s “shared values”.
Why these Offers Are Troubling
The short answer:
It hints to the potential fact that WeWork could be having trouble filling its centers, in new and existing markets. This could be understandable due to COVID-19, but given the company’s history, this seems like an ongoing trend for WeWork.
Even if members make the switch, there’s no guarantee they’ll stay beyond the year where they’ll be paying a discounted price. This is especially true if WeWork rates are significantly higher than those of its competitors—a bit hard to determine given that prices for private offices are not listed on WeWork’s website.
What does that mean for a company that claims it will become profitable in 2021?
It could mean the company isn’t as “on track” as it claims to be.
Beyond that, if WeWork continues to engage in such practices, it could lead to the depreciation of the entire flexible workspace market, as other operators may be forced to lower their prices even more in order to remain competitive.
Given the current situation caused by COVID-19, not many operators can lower their prices, as many are already struggling to make ends meet amid government lockdowns. Even if they could, it’s unlikely to be a sustainable strategy in the long-run.
