Army of Temp Office Firms Could Hurt WeWork

Print Email

WeWork recently raised about $1 billion, according to several media reports. Other reports show that its revenue about doubled to $764 million in the first half of the year. However, WeWork lost approximately $250 million in the same period, a sign it is paying dearly for its expansion. The company’s investors believe the growth will continue indefinitely. That may not be true. There are too many temporary office operations that compete with WeWork in every major market.

None of these temp office companies is huge. But a look at the New York City market shows there are dozens of them. Jay Suites, for example, has furnished offices, reception areas, conference rooms and cleaning services. Each is something WeWork¬†offers. Sage WorkPlace offers similar services and virtual offices that make it appear that people have a physical location, but they don’t. This virtual service has phone numbers and people who answer phones, and it makes it appear the client has an office and amenities that include conference rooms.

Regus is the best known and probably largest temporary office space company in New York. It has dozens of locations in the city. “Members” can work out of almost any of these office spaces if they need to move around the city. The company also has office space across the country.

The WeWork pitch is not unique, which means that its branding is critical. It does have many locations around the United States, and perhaps more than any of its competitors. In cities likely New York, it has a large number of addresses. However, a look at its services shows that it has temporary office space, space with short-term leases, free coffee, Wi-Fi, conference rooms, front desk service and office supplies. Nothing on the list is unique.

WeWork cannot afford to lose money for more than another two or three years, if it is like most huge startups. Investors eventually will expect to make profits on their investment. At some point, growth will not be enough. And the challenge to that growth is the many smaller companies that offer the same services.

I'm interested in the Newsletter