The market for rented desks in shared offices still has a lot of room for improvement, predicts the provider of coworking spaces, WeWork. "Many companies no longer want a ten-year lease," says Katharina von Schacky. The Germany boss talks about standards, growth opportunities and WeWork's new strategy.
WeWork dominates the coworking industry, but is also criticized in the industry for its business model: Allegedly, the "co" is missing from "coworking". Some wouldn't even count you in the coworking scene. What do you think?
Katharina von Schacky: To be honest, I don't understand that. For me, "Co" means by definition offering a shared office space. In the end, it's nothing more - and that's exactly what we do. So why shouldn't we be a coworking provider?
The "Co" is also meant more culturally. The exchange and cooperation is weaker in WeWork offices than elsewhere...
I find that an interesting perception - but I don't share it at all. I can only speak for us, but I would say that we are very community-oriented. We have a community team at our properties looking after members. This is famous worldwide for creating a good community. We have an app that shows our members exclusive networking events in their city. We organize after work events. The areas are also built in such a way that there are always encounters and exchanges. In that respect, I don't really understand the criticism.
Who do you think belongs to the coworking scene and who doesn't?
If you embellish the term coworking, then cafés with a work area can also count. You may not have a certain standard there, but it's about sharing jobs. There can then also be more providers included.
Your industry was struggling in 2022: with interest rate increases, the aftermath of the corona pandemic and a constant trend to work from home. How did you experience the past year at WeWork?
In Germany, WeWork has long been considered an interim solution. For example, when companies need office space at short notice. We never saw each other like that, but in fact we were mainly interesting for such companies. What we are observing globally this year is that flexibility is no longer just a "nice-to-have", but a "must-have".
What do you mean by that?
First of all, it is about the rental period. Many companies no longer want to conclude a ten-year lease. With us you don't have to. On the other hand, it is about access to an attractive area where everything is available: reception, top WiFi, very good coffee and much more. These are values that nobody wants to do without after the pandemic.
During the Corona period, there was a thesis that people would hardly commute to the office in the future, but would work in coworking spaces or from home. In your opinion, has this come true?
Corona has permanently changed working in the office. Many people, myself included, wished they could work as flexibly as they do today 20 years ago. The pandemic has shown overnight that this is possible. Of course, the pandemic has not made the office obsolete. However, it has shown that its use must be completely rethought. Working as a reason to come to the office is no longer enough. It's about meeting colleagues, exchanging ideas, but also having the opportunity to retreat by the hour. And it's about showing yourself to leaders. The corporate side naturally also has a great interest in good premises in order to attract talent.
However, some coworking providers complain that the hopes for growth from the Corona period have weakened significantly. Instead of one to three years until breakeven, they now expect about five years. Some don't make it at all and go bankrupt.
I can't say much about others. We have our own calculations - and of course Corona messed them up for us and for others. But we take a very close look and actually get along quite well.
Your spaces are all in top locations in German and international metropolises - that is, where an urban public lives that tends to be more open to new forms of work. Do you stick with this strategy?
In fact, we are only active in five of these seven German markets so far. For us, it's always a matter of making sure that our locations are used to full capacity in the first instance. If we can do that, then we can continue to grow. In this respect: Yes, we are initially focusing on these markets and then looking further. It is clear that we always grow where our members want us to. Most recently, for example, with the pharmaceutical company Organon in Lisbon. And in Germany, these are often cities like Berlin, Hamburg or Munich.
Smaller cities are not profitable for you?
Our members demand a standard - regardless of whether they want to work in Singapore, New York or Berlin. For example, a WeWork in Braunschweig, where I come from, would not be profitable - both in terms of demand and quality. This is currently working very well for us at the five locations and we want to continue to grow. But we are very disciplined and look very closely at the numbers.
That was not always so. Under the founder Adam Neumann, WeWork was considered downright megalomaniac. Today, the stock is at an all-time low, even though Neumann has been gone since 2019. How much of that spirit is still in WeWork today?
I only joined Wework after 2019. But we have made a strategic shift over the past two and a half years, underpinned by our efforts to cut costs and optimize our global real estate portfolio. At the same time, we have focused on sustainable growth and innovation in our core business.
Ever since interest rates have risen this year, many investors have been demanding more efficiency from companies, and money isn't flowing as freely. Do you notice that too and has your perspective changed?
We are well positioned. Our business model is well positioned for the current macroeconomic environment, as is the portfolio. In that respect, nothing has actually changed.
Were there no projects that you initially put on the back burner?
No, actually not. We tend to have other problems, such as supply chain problems. We had that at our new office in Berlin-Mitte. Ultimately, however, we got the problems under control.
The market for coworking spaces is becoming increasingly intense. There are providers who operate both in the cities and on the outskirts. There are also small local providers. Who do you see as competition?
The market is huge. Many experts say that 20 to 30 percent of all office space will be converted into flexible space in the future. We are currently in the single-digit percentage range. So there is still room for many providers. The smaller providers are also doing great, by the way. We keep in touch with them to learn from each other. Everyone has their focus - but the periphery is not ours.
Which companies are you addressing with WeWork in particular - and which ones are you not?
Actually all. We have coworking spaces, but we also rent classic offices. Nevertheless, it is always fascinating to me how many "Fortune 100" companies are among our customers - i.e. companies that are among the 100 largest in the world. 58 percent of them work with us.
And which units do they come from? Are there areas that are better suited to coworking than others? Something has changed. In the early years, it was more the tech or innovation teams. In the meantime, this has become much broader - also because a different way of thinking has moved into the HR departments: Where do the employees feel comfortable? What services do you need? Can I do it myself at all? In these areas, flex office is often an economic factor – but not always. For example, some can work from home without loss and feel comfortable there. Coworking is not suitable for every employee. That is also part of the truth.
Jannik Tillar spoke to Katharina von Schacky
The interview first appeared on Capital.de.
