Flexible Workspace Insights: “WeWork Is Basically Regus With A Paint Job”

“What’s amazing to me is that when you talk about valuations […] WeWork’s value per customer is $580,000. Per workstation customer! Nobody has valuation like that.” – Frank Cottle, The Global Startup Movement

When you’ve been in the business centre industry as long as Frank Cottle has, analysing and predicting major moves within flexible workspace becomes second nature.

During an interview with entrepreneur Andrew Berkowitz as part of his podcast series, The Global Startup Movement, Frank explained:

“I’ve been in the serviced office industry in one form or another since 1979. We started as a commercial property company, buying land and building our own buildings, which we did for about 10 years […] We built a new building from the ground up every 110 days, for 10 years.”

Frank and his business partners developed their own business centre brand, which they later sold “at the height of the dot.com era”. Now Frank chairs the Alliance Business Centers Network, a licenced network model encompassing 12 companies – including technology and workspace management firms – across hundreds of locations in more than 50 countries. He is also the Executive Publisher of online industry news magazine, Allwork.space.

He was invited to join Andrew Berkowitz and share information on the inner workings of the flexible workspace industry, his thoughts on the latest developments, and his vision for the future of commercial real estate.

Listen to the full 25-minute interview or read the transcript here.

In brief, here are our top takeaways from Frank’s discussion:

AB: With Softbank’s massive $4.4billion investment into WeWork, what do you think that signals for the direction the coworking market is headed in?

FC: What’s that old saying, a fool and his money is easily parted? WeWork is […] a business process outsourcing company, like everything else in our industry. It’s basically Regus with a paint job, in my opinion. If you really look at their business model, they lease space and they carve that space up and they re-let it to others. That’s what they do.

FC: What’s amazing to me is that when you talk about valuations, Regus has a 25+ year track record. It’s profitable, it has 3,600 locations in over 1,000 cities, they’ve been there, done that, got the t-shirt. They’ve been in a variety of up-and-down markets through a number of economic cycles on a global basis. WeWork has only been in one upswinging market, one half of one cycle. So it’ll be interesting to see how they stand a downturn.

If Regus were to not grow a single center in 2017, and WeWork were to hit 100% of all of their very ambitious growth projections for 2017, WeWork would still be about one-twentieth the size of Regus. Now, Regus trades at a valuation of about $4billion, maybe a little more, but people are valuing WeWork at $20billion? Think about that. WeWork’s value per customer is $580,000, per workstation customer! Nobody has valuation like that.

AB: From your perspective, how has the globalization of the workforce and the startup scene changed your industry over the past 5-7 years?

FC: I think our industry has actually changed the way startups work, candidly. I think we are as much of a change agent as anything else, because we created that flexibility factor that all startups need.

FC: The entire structure of employment has shifted dramatically […] We’re able to work without borders, we’re able to work anywhere in the world, and that has a massive impact on the concept of starting a business […] We’re redistributing wealth through restructure of employment, without borders, on a globalized basis, and that’s a phenomenon that’s never occurred before.

AB: What are some of the hottest markets right now?

FC: Asia! Right now, Asia’s a very hot market. There are actually quite a number of companies from different parts of the world looking to enter their business models through Asia and through China, as opposed to traditional markets here in the US.

Read the full transcript here.