In the future, you’re going to love going to the office. Everything you need to do your job effectively will present itself without effort. You won’t have your own desk, because your employer will know you only use it for 63 percent of the day. But you won’t mind sharing it, because said employer will make sure you have a private room with green leafy plants, soundproof walls, and warm light between 2 and 2:20 p.m. so you can call your daughter. At 3:30 p.m., when you need a conference room for the product managers’ meeting, you won’t even have to book it. It’ll just be there. And everyone attending remotely will already be invited.
Jessi Hempel is Backchannel’s editorial director.
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“This isn’t right away, of course,” David Fano tells me. “But it’s not that far out.”
We’re standing in the epicenter of WeWork’s cavernous New York City headquarters, where Fano, the company’s Chief Growth Officer, has set up a demo area to show off new technologies for prospective clients. A balding guy with a shaved head and dark eyebrows, Fano stands 5’11”, and when he touches his phone to a desk, it recognizes him and raises itself to rest at his standing height. The smart furniture is just one of many ways that WeWork is wrangling data that it’s collected over the years to quietly reorganize an office around its workers. To Fano’s right is a touchscreen the size of a chalkboard where he can, with a swipe or a pinch, pull up real-time information about any of WeWork’s 164 open locations. Want to know when the air filters were last cleaned in WeWork’s Mexico City offices? Curious how many conference rooms are currently occupied in Charlotte, North Carolina? This program can tell you.
WeWork is counting on this research to form the meat of its business and to justify its newly ordained position at the very top of an elite group of startups. Maybe you thought WeWork was about hip shared offices for millennials and beer on tap, or corporate slogans in twee typeface that read “Do What You Love.” But WeWork has much larger ambitions. Seven years after it opened its first coworking spot in SoHo, it has catapulted into a briskly ballooning global business—and it is now trying to position itself as the foremost expert on offices. In the past two months, WeWork has partnered with Softbank to open in Tokyo, where it will own 50 percent of WeWork Japan; it has announced a Chinese unit; and it has purchased Singaporean competitor Spacemob. It’s operating in 16 countries outside the United States right now, and it has launched upscale, dorm-like apartment buildings—aptly called WeLive—in New York, Washington, D.C., and soon Seattle. In late August, the company raised $4.4 billion from Softbank’s gigantic Vision Fund. WeWork is now valued at close to $20 billion, putting it in a league with Palantir and SpaceX as the most highly valued private US tech startups after Airbnb and Uber.
WeWork’s bet is that because it is amassing so much office space and studying how thousands of different businesses use it, it can position itself as the company with the most valuable firsthand knowledge about how jobs best get done. Since its inception, WeWork has been collecting data about how people work, where they are most productive, what they need to feel good, and how much space they really require in the first place. (It’s less…much, much less…space than you think.) So far, WeWork has applied this knowledge to its own locations. But for the past year, the company has quietly been experimenting with ways to turn that data into new products for enterprise customers. These offerings include building out custom office interiors, licensing software that companies can use to book conference rooms, analyzing data on how people are using those conference rooms, and providing on-site human community managers indoctrinated in WeWork’s community-minded philosophies. Fano calls this grab-bag of services “Powered by We.”
Think of it as office space-as-a-service. To date, big companies like Microsoft or IBM have used WeWork spaces in places where they don’t need to have as many employees or in areas where they believe their employees might benefit from an outside environment. But many of those companies are now testing deeper integrations. WeWork manages an entire building for IBM in Greenwich Village, and it now runs Airbnb’s Berlin office as well as Amazon’s Boston office. Soon, the company anticipates, large enterprises will outsource their office buildings to WeWork, which will draw from its increasingly sophisticated data to insure that enterprise clients get the most productivity possible for the least amount of money. It’s a natural extension of WeWork’s current business, according to Chief Operating Officer Jen Berrent, who explains that the idea of adding a services business is “something that there’s demand for in the market.”
Over time, this could be a much bigger opportunity than coworking spaces, one in which everything WeWork has built so far will simply feed an algorithm that will design a perfectly efficient approach to office space. WeWork aspires to be the de facto source to which businesses will turn when they need help figuring out how to spend the least amount possible for an environment that will delight employees and entice new ones.
But first, WeWork must sell large companies on the promise that it can manage their space better than they can.
Since the advent of computing, researchers have been attempting to calculate more efficient ways to lay out the modern office. As far back as the early 1970s, academics at the University of Cambridge were using algorithms to calculate walking distance between rooms. They’d give each room a walkability score and use it to optimize floor plans, reducing walking time. (Remember that in the 1970s, there was no email, and also no Slack. Walking was how information traveled.)
Like nearly everything else, the field has made significant progress with the introduction of machine learning. “It’s only fairly recently that we have the computing power, the memory, and the democratization of these technologies, especially in machine learning,” says Josh Emig, a bearded architect with a Roman nose. Emig arrived at WeWork in the fall of 2015, around the time that the company formalized a research and development department. WeWork’s hypothesis is that it has been born into a paradigm shift, and it must understand the nature of that shift in order to design for it.
To capitalize on this, WeWork is racing to build a business at the same time as it develops an organization to run it. The company is hiring so many people so quickly that no one is quite sure of titles. Fano, for example, was Chief Product Officer, but that’s also the title just given to Shiva Rajaraman, who signed on from Apple in late August to oversee software. At that point, Fano’s title switched to “Chief Growth Officer.” When I came in to meet Fano, we were joined by Veresh Sita, who’d previously done a stint as Chief Information Officer for Alaska Airlines. It was his second day of work, and nope, he didn’t have a title yet. Apart from the founders and Berrent, nearly all of the dozen or so WeWorkers I spoke with for this story had been at the company for less than two years.
All were recruited in part by founder Adam Neumann’s charismatically delivered promise that WeWork is about making “a life, not just a living.” A lanky, long-haired Israeli who was raised partly on a kibbutz, Neumann started the company with his friend Miguel McKelvey, a trained architect who is now Chief Cultural Officer. Neumann is a spokesperson for the concept of togetherness, and in many ways, WeWork’s hard-charging blend of the personal and professional is an extension of his personality. He has been known to party a little too hard or speak a little too freely—both traits that he’s under pressure to tamp down as his company grows—but his enthusiasm is infectious and serves to rally WeWork’s employees around common cause.
There has long been skepticism about the durability of WeWork’s business model. To date, the company has made its money by signing long-term leases of up to 15-20 years on office space, and then renting it out by the month, mostly to individuals and small businesses. Because WeWork got its start in the wake of the financial crisis, when 2010 New York rents were a bargain, it has benefitted from holding advantageous lease rates as the economy has grown and rents have gone up.
But coworking is a volatile business—especially for companies that choose to rent real estate, acting as a middle manager, rather than buying it outright. Though there are dozens of coworking companies that have cropped up in recent years, most are smaller, with only a few outposts. WeWork’s closest model is Regus, a boring-but-practical shared office space business headquartered in Luxembourg. Founded in 1989, Regus went public in 2000 on the London Stock Exchange. It suffered so much in the wake of the dot-com crash that its US business filed for bankruptcy. Regus restructured so that it could renegotiate leases more quickly, and that helped it survive the downturn of 2008, “but they didn’t make much money,” says Berenberg analyst Calum Battersby. He contends that WeWork’s current business “is more similar to the [Regus] business model of the early aughts when the business collapsed, than the one now.”
WeWork’s massive paper valuation, which makes it theoretically worth more than the largest publicly traded commercial real estate company, Boston Properties, suggests its backers believe it is something more. From the start, early investor Michael Eisenberg, a partner at Israeli venture firm Aleph, has seen WeWork’s potential in convincing large companies to outsource their real estate needs in the same way that they outsourced their computers back in the late 1980s and early 1990s. The hardware quickly became commoditized, and the companies made their profits by selling services. Eisenberg believes a similar thing will happen with real estate. WeWork will be able to achieve significant economies of scale by controlling so much of it. “It will be cheaper over time than anything else,” he says. “Banks spend a lot of money acquiring customers that they then try to sell extra services to.” WeWork may be able to “to sell and provide [its members] services and bundles that no one else can afford to do.”
WeWork’s true durability has yet to be tested. It has expanded over the course of a decade when the economy has grown steadily. Its best bet for the future is that it can grow so large, picking up so much office space—and negotiating power—in so many regions across the world that by the time the economy turns down, it can hedge its risks. If one area suffers a downturn, a gargantuan WeWork will have the clout to better renegotiate leases. What’s more, it could make up its losses in other markets, or through other products and services.
That’s where Powered by We comes in. Right now, with 144 offices across the world, WeWork has 10 million square feet under management. But if it re-envisions itself as a company that can manage space on behalf of other businesses, its opportunities expand considerably. As we discuss this, Fano leans back in his chair. In his mind, he can see the company’s addressable market growing to include every square foot of office space in the entire world. “Tokyo is a billion. New York City is 400 million. Kansas City is 50 million. These are all cities I looked at recently,” he says.
It’s typical startup language—bold hyperbole. But Fano believes it’s only a matter of time before WeWork can sell enterprise customers on even more of its brand of workplace intelligence. And that intelligence will both improve, and grow cheaper, as more of them sign on.
I’ve visited half a dozen WeWork locations over the last couple of years in at least three different cities. I’ve stopped in to visit friends. I’ve reported on startups based in WeWork offices. I recently bought kitchen cabinet doors from a company with a showroom inside of a midtown Manhattan WeWork. Just as I can always expect Starbucks to have a bathroom and outlets, or the Four Seasons to welcome me by name with a glass of champagne, I know what to expect when I enter a WeWork. There’s a youthful door attendant ready to greet me as I scan my driver’s license to identify myself. There’s beer, or water with fresh orange slices, or coffee—good coffee, not the Alterra java the Flavia machine spits out in my office. A list of weekly activities is posted in the elevator, and they reliably involve other WeWork companies trying to dress up their pitches in helpful seminars. People come and go, dropping their laptops nearby, and if you chill on a kitchen stool, an informal signal that you’re free for a chat, someone will usually come along and say hello.
Nothing about this environment is accidental. “When people walk through our doors, they say, ‘There’s something about the energy here,” says Dina Berrada, a product manager for community operations. An Amazon alumna, she looks after the systems and tools the company uses to operate and grow its products. One of Berrada’s teams is building the software tools that allow community managers at each location to create those seamless experiences. So, when a member walks into a WeWork, a community manager may get an alert to wish them happy birthday. Berrada mentions a newly launched feature that allows community managers to keep notes on members’ preferences. So, if a member mentions a whiskey she likes, she may find a bottle on her desk if she has reason to celebrate.
The promise of an energetic work culture that appeals to millennials, among others, is one of the primary things WeWork offers clients. “As we look at designing our workplaces for the future, that sense of community seems more and more important to employees,” says Melissa Reinke, a workplace experience strategy leader with GE. GE has a master agreement with WeWork, and has employees in six locations. It has taken most of a floor in a Boston WeWork office. “You want to give people a reason to come to the office and collaborate. With tech, everyone could work at home if they wanted to,” she says.
Spatial analysis, as the field is called, is crucial to creating the look and feel of a WeWork. Last year, a design researcher named Carlo Bailey was part of a research team that launched a study to predict how WeWork members would use meeting rooms. Until recently, this was mostly done by gut check and through past experience. When you acquire a space in an area, you take your best guess about how many conference rooms you’ll need. The team’s goal was to use existing data to figure out the optimal number of meeting rooms to include in new WeWork locations. “We studied utilization patterns across our entire fleet, and using the neural network we were able to predict with 80 percent accuracy meeting room utilization,” says Bailey.
Just as important, to a company which is obsessed with culture, is more qualitative design research. One recent project involved talking to mothers who were returning to work to get perspectives on what they needed to best support them in the transition. The lead researcher on that project is Rachel Montana, a social psychologist by training. Her group’s findings will address “everything from how many rooms we put in spaces to what goes in those new mothers’ rooms to how they’re handled from a security and access standpoint.” Emig says the company will collect feedback that it can then use to improve the experience. It’s agile software development, but for real estate. Says Emig, “This is rare. It doesn’t really exist in architecture as much as it should.”
Recently, Emig’s team has developed a process for helping enterprise members do some of this research for themselves. When a company signs up to take a full floor, say, which usually involves signing a three-to-five year lease, Emig’s team completes a research and discovery process. “We use a lot of the methods that these guys have perfected internally in WeWork,” says Emig.
As important as culture is to clients, they really want to spend their money more efficiently. “That is the holy grail for folks,” says Doug Chambers, a WeWork vice president who has been attending sales calls all summer after WeWork acquired his startup FieldLens last June. “They want to know how their space is being utilized, how can they cut down on that space in places where it’s not being utilized efficiently, and at the same time get that cultural community aspect happening inside of their buildings.”
Customers report liking WeWork’s ability to build out custom space quickly in nearly any market. Earlier this summer, for example, NASDAQ hired WeWork to build out an entire floor to house 25 members of its innovation team in midtown Manhattan. “It was quick,” says Raymond Mays, who is the global head of real estate, facilities, and security for NASDAQ. “We did this from signing to go in about three months, and that was because we had desks we wanted to purchase,” he says, explaining that if he’d gone with WeWork’s suppliers for desks, the office would have opened even more quickly. He said that turning to WeWork for this support “saves us time and allows us to focus on key priorities.”
WeWork also believes it can help companies make existing offices smaller. Consider that in the 2000s, private sector US companies expected to allocate between 200 and 400 square feet per person when building out work spaces. Today, the industry standard is about 190 square feet, according to GSA. In five years, the space allocation could hit just 60 square feet. “We will be able to help them make better decisions about what space to not have anymore. So it’s not necessarily about always expanding your space,” says Chambers.
Indeed, at an April breakfast for analysts, Fano talked about a multinational travel company that was spread out over three floors of an office building in Chicago. It hired WeWork to redesign and manage the space. WeWork was able to reduce the company’s space to just two floors while adding a wellness program, a calendar of events, and landscaped outdoor areas. WeWork is transforming the office into a place that better serves workers as well as their employers.
Everything in our lives is being personalized and optimized, thanks to the emergence of artificial intelligence. Predictive technology ensures the ads we see in our Facebook stream are directed exactly to us. It means our calendars will notify us to buy flowers on our spouse’s birthdays. Our diets can be tailored exactly to our genetic makeup. Is it that much of a stretch to believe that soon, our workspace will be tailored exactly to us as well?
This is WeWork’s master plan. Through a combination of culture and technology, it will, over time, create the perfect platform for reducing offices to the least square footage possible while at the same time energizing the people who roam through those offices to embrace its brand with the fervor of early iPhone diehards. The company aims to position itself to be the “Intel Inside” of office space—the de facto provider of desks, and by extension, the services that go with them.
That reality is a long way out. It’s too early to say if businesses testing out aspects of the strategy are going to embrace it. Perhaps the real test will come when the economy, having pushed mostly up and to the right for longer than most economic cycles usually last, finally turns down. Many suspect WeWork will suffer dramatic losses as small businesses abruptly close shop and entrepreneurs work from their couches instead of the communal watering hole, leaving WeWork with long leases on empty buildings.
But there’s also a school of thought that suggests WeWork will become an answer to companies looking to cut down on expenses quickly. That’s what Veresh Sita is betting. Remember him? I met him on his second day of work, and he didn’t have a title yet. Now he’s a senior vice president of product. Earlier in his career, he’d worked in commercial real estate with Colliers International, and he explains, “This technology we talk of is a massive double hedge. In boom times, people want it because it provides the experience…In a downturn, most companies are going to look towards that technology to bring in the efficiencies and the streamlining.”
Indeed, GE’s Reinke is most impressed by WeWork’s utilization software, which relies on sensors and other inputs to let community managers know how WeWork locations are being used. Right now, she says, GE doesn’t use it. But she envisions a possibility for how it could be helpful in the future. “Any real estate leader would tell you a building is only used 70 percent of the time at any given time,” she says. People go on vacation. They’re traveling. Right now, she says, the Boston office has 88 desks. What if she could figure out exactly how people were using the space, and house 88 people across 75 desks?
How do we house more people, more productively, for less money? All this stuff is viewed as efficiency. But WeWork’s master calculation is that it’s also going to make your office life—the 8.9 hours you spend attending to the tasks for which you get paid every day—better. If WeWork gets this right, it could usher in the best of all possible office worlds, where the customary trade-off between worker happiness and company profitability magically turns into an everyone-wins game.