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  • Work-life
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  • Coworking
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    Adapt Or Die: Future-Proof Your Business With These Essential Tips

    Adapt Or Die: Future-Proof Your Business With These Essential Tips

    Adaptable Hybrid Work Approach Crucial for Employee Retention

    Adaptable Hybrid Work Approach Crucial for Employee Retention

    10 Changes Your Organization Must Make To Succeed This Year

    10 Changes Your Organization Must Make To Succeed This Year

    Do Pay Transparency Laws Actually Matter

    Do Pay Transparency Laws Actually Matter?

    Evaluating the Effectiveness of Hybrid Work Models and Office Reintegration

    Evaluating the Effectiveness of Hybrid Work Models and Office Reintegration

    Establish An Effective Hybrid Work Environment In 6 Steps

    Establish An Effective Hybrid Work Environment In 6 Steps

    IWG Selling The Crown Jewels? You Would Think So Judging By The Asking Price

    IWG Selling The Crown Jewels? You Would Think So Judging By The Asking Price

    The Million-Dollar Mistake Businesses In California Cannot Afford To Make: Compliance Deadline Approaching!

    The Million Dollar-Mistake Businesses In California Cannot Afford To Make: Compliance Deadline Approaching!

    How Africa’s Economy will Harness Digital Tech in the Future of Work

    How Africa’s Economy will Harness Digital Tech in the Future of Work

  • Work-life
    Astonishing Deficit in Hybrid Work Protocol Confirmed by Recent Studies

    Astonishing Deficit in Hybrid Work Protocol Confirmed by Recent Studies

    Driving Sustainable Change: Advice for Facilities Managers

    Driving Sustainable Change: Advice for Facilities Managers

    How To Strengthen Your Workforce: Cultivate Growth Opportunities For Women

    How To Strengthen Your Workforce: Cultivate Growth Opportunities For Women

    Build The Best Work Playlist: 8 Songs To Avoid And 10 To Blast

    Build The Best Work Playlist: 8 Songs To Avoid And 10 To Blast

    Escape The Lingering Cold In These 7 Countries Perfect For Remote Work

    Escape The Lingering Cold In These 7 Countries Perfect For Remote Work

    Say Goodbye Comfy Pants – 9 in 10 Companies Planning RTO This Year

    Say Goodbye Comfy Pants – 9 in 10 Companies Planning RTO This Year

    Remote Work Is Just E-Commerce Déjà Vu All Over Again

    Remote Work Is Just E-Commerce Déjà Vu All Over Again

    Four Days Is Enough

    Four Days Is Enough

    The CDC’s Vision For The Future Of Worker Health

    The CDC’s Vision For The Future Of Worker Health

  • Tech
    What Every Business Needs to Know About Managed Development Services

    What Every Business Needs to Know About Managed Development Services

    LiquidSpace and Kadence Team Up to Revolutionize Hybrid Work

    LiquidSpace and Kadence Team Up to Revolutionize Hybrid Work

    Using IoT Tech Is Crucial For Office Planning And Employee Health

    Using IoT Tech Is Crucial For Office Planning And Employee Health

    Paving the Way for the Future of the Workplace With the Metaverse

    Paving the Way for the Future of the Workplace With the Metaverse

    What You Need To Know About Web3 And Finding Great Developers

    What You Need To Know About Web3 And Finding Great Developers

    The Price Of Remote Work? Your Privacy

    The Price Of Remote Work? Your Privacy

    Should You Put Your Job On AI-Pilot Mode?

    Should You Put Your Job On AI-Pilot Mode?

    3 Steps To Build A Three-Dimensional Hybrid Workplace

    3 Steps To Build A Three-Dimensional Hybrid Workplace

    PETER MISCOVICH

    Peter Miscovich JLL Global Future Of Work Leader | The Hybrid Workplace Evolution: Unlocking The Future Of Work

  • Design
    How to Design for Behavior To Create a New In-Person Working Environment

    How to Design for Behavior To Create a New In-Person Working Environment

    People-Driven Alternate Workspaces

    People-Driven Alternate Workspaces

    How Physical Spaces Shape Human Relationships and Emotional Well-Being

    How Physical Spaces Shape Human Relationships and Emotional Well-Being

    Resimercial Design Balances Comfort and Sustainability in the Office

    Resimercial Design Balances Comfort and Sustainability in the Office

    Sustainability, Well-being, and the Building Blocks of a Biophilic Workplace

    Sustainability, Well-being, and the Building Blocks of a Biophilic Workplace

    Repurposing Furniture Realizing the Environmental, Economic, and Design Benefits

    Repurposing Furniture: Realizing the Environmental, Economic, and Design Benefits

    Designing A Better Future For The Workplace

    Designing A Better Future For The Workplace

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    Goodbye Burnout, Hello Balance: The Power of Meditation Spaces in Modern Workplaces

    Goodbye Burnout, Hello Balance: The Power of Meditation Spaces in Modern Workplaces

  • Workforce

    5 Steps To Master The Hybrid Work Model

    Unmasking the Corporate Return-to-Work Fallacy A Genuine Approach to Junior Staff Development

    Unmasking the Corporate Return-to-Work Fallacy: A Genuine Approach to Junior Staff Development

    Diplomas and Dilemmas: How 2023 Graduates Can Navigate Job Market Chaos

    Diplomas and Dilemmas: How 2023 Graduates Can Navigate Job Market Chaos

    Want To Stop Employees From Walking Out The Door? Build Them A Career Ladder

    Want To Stop Employees From Walking Out The Door? Build Them A Career Ladder

    Unveiling the Hidden Potentials of Remote Work Productivity

    Unveiling the Hidden Potentials of Remote Work Productivity

    Side Hustles or Survival Jobs? Overemployment Spikes Among Remote Workers

    Side Hustles or Survival Jobs? Overemployment Spikes Among Remote Workers

    The Reality of Remote Work and Wellness

    The Reality of Remote Work and Wellness

    Unlock the Power of Employee Resource Groups: How To Avoid Common Pitfalls And Create A Group That Drives Change

    Unlock the Power of Employee Resource Groups: How To Avoid Common Pitfalls And Create A Group That Drives Change

    Strategies For Success In Senior HR Roles In The Future Of Work

    Strategies For Success In Senior HR Roles In The Future Of Work

  • Coworking
    Reaching Beyond The Desk: How Coworking Spaces Can Transform Communities

    Reaching Beyond The Desk: How Coworking Spaces Can Transform Communities

    All Good Work Partners with JLL To Support Nonprofit Organizations

    All Good Work Partners with JLL To Support Nonprofit Organizations

    We Told You So

    We Told You So

    LiquidSpace and Kadence Team Up to Revolutionize Hybrid Work

    LiquidSpace and Kadence Team Up to Revolutionize Hybrid Work

    How the Rise of Four-Day Work Weeks Could Reshape the Coworking Industry

    How the Rise of Four-Day Work Weeks Could Reshape the Coworking Industry

    How Coworking Spaces Can Leverage Blockchain to Enhance Their Services

    How Coworking Spaces Can Leverage Blockchain to Enhance Their Services

    Want To Work At The Ritziest Coworking Office In The World? It’s Going To Cost You

    Want To Work At The Ritziest Coworking Office In The World? It’s Going To Cost You

    The Warehouse_ Where Coworking Meets Inspiration In The Heart Of New Orleans

    The Warehouse: Where Coworking Meets Inspiration In The Heart Of New Orleans

    The U.S. Government Keeps Playing Coy With Coworking

    The U.S. Government Keeps Playing Coy With Coworking

  • Marketing
    8 Reasons Why Sponsored Content Is Worth The Investment For Your Brand

    8 Reasons Why Sponsored Content Is Worth The Investment For Your Brand

    Instagram GenZ

    2023 Instagram Trends Reveal How To Market To Gen Z

    TrueView360 Interactive Virtual Tours

    TrueView360s Interactive Virtual Tours

    2023 Future Of Work Forecast: Focus Marketing On Values and Customer Experience, Not The Product

    2023 Future Of Work Forecast: Focus Marketing On Values and Customer Experience, Not The Product

    Want Your Coworking Newsletter to Actually Convert

    Want Your Coworking Newsletter to Actually Convert? Start by Keeping It Simple, Fun, and Consistent

    5 Pros Share How To Use Instagram To Grow Your Coworking Business

    5 Pros Share How To Use Instagram To Grow Your Coworking Business

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  • CRE
    75% Of Business Leaders Lack Data Needed For Crucial CRE Decisions

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    San Francisco Skyline

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    3 Things CRE Players Must Do To Stay Relevant In 2023

    2023 Future Of Work Forecast: 3 Things CRE Players Must Do To Stay Relevant In 2023

    The Office Space Sector Is Projected To See A Strong Fourth Quarter In 2022

    The Office Space Sector Is Projected To See A Strong Fourth Quarter In 2022

    Meet Flex Space More Chaotic Cousin Gray Spaces

    Meet Flex Space’s More Chaotic Cousin: Gray Spaces

    The Future Of Our Offices And Our Planet Hinges On The Real Estate Industry Priorities

    The Future Of Our Offices — And Our Planet — Hinges On The Real Estate Industry’s Priorities

    JLL New Future Of Work Survey The Next Few Years Are Crucial For Commercial Real Estate (2)

    JLL’s New Future Of Work Survey: The Next Few Years Are Crucial For Commercial Real Estate

    What Is The Impact Of Hybrid Working On Space Optimization

    What Is The Impact Of Hybrid Working On Space Optimization?

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Are WeWork And IWG Doing It Wrong? Investment In Coworking Should Be More Lucrative

WeWork and IWG are posting massive losses, but the coworking industry appears to be doing well with record-high occupancy.

byJonathan Price
November 3, 2022
in Coworking
Reading Time: 5 mins read
A A
Are WeWork And IWG Are Doing It Wrong? Investment In Coworking Should Be More Lucrative

Buildings in smaller cities or suburbs, where the space may be rented on a traditional lease for only a quarter of the square-foot-cost of prime city centers, can provide an even bigger return.

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  • The prices of the two principal coworking companies, WeWork Inc. and IWG PLC, are down 76.5% and 59%, respectively, since November 2021.  
  • The number of coworking centers is increasing rapidly despite these high-profile losses.  
  • When done well, the provision of coworking centers can be a very profitable business. Buildings in smaller cities or suburbs provide an even bigger bang for the buck. 

It isn’t often you see small entities beating larger well-known corporations, especially with financial gains. Yet, that’s the current strange state of the world of investment in coworking.  

Smaller coworking operators are seeing record-high occupancy, strong cash flow and a rapid increase in locations. Meanwhile, WeWork Inc. and IWG PLC are in the red, badly. 

So, is it worth investing in coworking? With such diametric results, it’s not an easy assessment to make.  

It’s a solid no if you are a stock market investor where the performance of the listed shares has been truly dismal. The prices of the two principal quoted companies, WeWork Inc. and IWG plc, are down 76.5% and 59%, respectively since November 2021.  

Despite WeWork’s revenues increasing 7% during Q2 2022 and 37% year on year, the company made a net loss of $635 million in the second quarter, and, for what it’s worth, an adjusted EBITDA loss of $134 million, whereas IWG made a net loss of £77 million on revenues of £1,287 million. 

On the bright side, in terms of cash flow, IWG did see a positive free cash flow of £189 million while WeWork was unable to stem the flow and $405 million drained out of its coffers.  

WeWork’s much worse share price performance can probably be explained by a combination of the weak cash flow position, and IWG’s larger size and smaller losses, plus the fact that the WeWork price had farther to fall, having launched with an overvalued de-SPAC IPO last year. 

This is not the end of the article however, because the track record of the quoted coworking operators is only the first half the story, and the second half is much more uplifting. That this should be true is not surprising, if you stop to think for a moment, because if coworking were as unprofitable as WeWork and IWG suggest, why would the number of coworking locations be increasing so fast? 

The answer is that when done well, the provision of coworking space can be a very profitable business indeed. The best explanation of the underlying rationale for the business that I have heard recently came from Toby Coulthard of Great Portland Estates (GPE), one of London’s traditional great landlords, and not an organisation you would have associated with coworking even ten years ago. 

During a recent CoStar webinar on flexspace, Coulthard made the comment that: on a cash flow basis, GPE was targeting a premium of 35% from its flexspace offering compared to the cash flow from the same amount of conventional space. And, on a net rent basis, the difference was even higher — the company was looking for a premium of 50% more than the net rent from conventional space.  

Those numbers are noteworthy enough, but he then went on to say that the company was beating both targets easily, with an actual cash flow premium of 43% and net rent premium of 75%. 

Another panellist on the same webinar was Helen Causer of Related Argent. Causer is in charge of the largest urban redevelopment in the U.K. at London Kings Cross. She said that the group was building a 170,000-square-foot building wholly dedicated to coworking that would be operated by The Office Group, a well-known U.K. coworking company.  

It is noteworthy that the all the other office buildings in this redevelopment are 100% let already. The new building could easily have been let conventionally if the developer had wanted to, but it preferred to have a significant coworking facility on the site. 

Speaking from my own experience, the premium to be gained from using space as coworking rather than conventional space is even larger than the numbers quoted by Toby — if the underlying cost of the space is lower, because, for example, the building is in a less favored location.  

So, buildings in smaller cities or suburbs, where the space may be rented on a traditional lease for only a quarter of the square-foot-cost of prime city centers, provide an even bigger bang for the buck.  

Using Toby’s measure of the net rent, it is possible to get a 100% premium or more in a second-tier location by using the coworking model. Of course, it is much harder work, so the premium is not free of charge. 

In the past, it was this requirement for hard work and the need to deal in much smaller spaces that put the traditional landlords like GPE, Land Securities or British Land off investing in serviced space. They were simply too lazy to be interested, and life was too easy in the conventional leasing world. How times have changed. 

Back to WeWork and IWG for a moment: the advantage of coworking business in secondary locations, small-city premium if you like, partly explains why IWG performs less badly than WeWork. It simply has many more small city buildings than WeWork does and fewer of the prime trophy locations that lost money hand over fist during the Covid lockdowns. 

Even allowing for the small-city premium, it does not explain why the two giants are losing money so heavily when smaller coworking operators are enjoying a great time with record-high occupancy.  

We must look elsewhere for the answer to that question, and I cannot help wondering if it is simply that WeWork and IWG are not that good at what they do?

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Tags: BusinessCoworkingCREInvestmentOpinion
Jonathan Price

Jonathan Price

Jonathan is a Chartered Fellow of the Chartered Institute for Securities & Investment and was responsible for the world’s first ever public fund for investment in coworking space. Today he acts as a specialist consultant and is a visiting professor at a leading French business school.

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