WeWork unveiled details today about a new suite of services called “HQ by WeWork,” which is designed to capture mid-sized tenants.
The coworking company hopes to snag the growing sector of the corporate market that includes companies employing 11 to 250 people by offering in-house brokerage services, leasing and office management, executives announced during a press briefing this morning at WeWork’s West 23rd Street outpost in Chelsea. The Flatiron-based company has already inked six leases with mid-sized tenants who typically take a full floor of 5,000 or 6,000 square feet, and it’s negotiating 400,000 square feet of leases throughout Manhattan. The new offerings will initially be available in New York City, but WeWork hopes to expand HQ to pricey markets across the country and the globe by the end of this year.
The first HQ tenant was Troops, a software company that helps sales teams incorporate sales and customer data into their Slack chats. Dan Reich, the startup’s CEO, said they had bounced around self-managed coworking spaces on subleases throughout Manhattan until landing at a WeWork.
“We couldn’t get the privacy of our own space [in a WeWork], so we started having that conversation about this new offering,” Reich told reporters. When his 25-person company moved into its new Flatiron office in April, “it was turnkey—everything from Voice Over IP, the TV, even little things like Bose speakers so we can play music throughout the day. If it weren’t for WeWork doing it, I would have had to find someone to do it, and then I become an office manager, which is the opposite of how I want to spend my time.”
The idea is that WeWork finds a space using its own in-house brokers. Then the company leases the space from the landlord and builds out the office in the style that many have come to associate with the ubiquitous shared space provider—warm wood, glass-walled conference rooms, prefabricated phone booths, bright primary color accents—while allowing the tenant to choose a few minor customization options, like certain wall colors, finishes and layouts.
Growing tenants get their own private office with their own branding, but WeWork takes care of almost everything from soup to nuts, including installing Wi-Fi and other IT infrastructure, managing heat and air-conditioning, cleaning the office and even watering the plants.
HQ offices can also be 15 to 20 percent cheaper than a traditional WeWork coworking arrangement because tenants can choose to forgo the usual amenities, like large conference rooms, a full community staff and events on a weekly basis, according to WeWork Chief Growth Officer Dave Fano. However, tenants using the HQ service will still have access to those perks at nearby WeWorks. The expectation is that those tenants would commit for at least a year, with at least three months of notice before vacating. If tenants want customization and amenities beyond what a typical WeWork offers, they can also opt to pay more.
The overall concept is “standalone private offices with private entrances and a service-lite model,” accordin to a presentation WeWork showed reporters. The coworking giant is also creating its own licensed brokerage team as part of its new real estate advisory arm, but it will continue to offer commissions to outside brokers who bring them tenants, said WeWork spokesman Arif Shah. He couldn’t comment on who was being hired but said the company was also bringing on real estate advisors and other kinds of pros to staff up its new team.
Jason Bauer, the CEO of Voda Bauer Real Estate and the founder and former CEO of Crumbs Bake Shop, was tapped to lead the brokerage team (Avi Voda, Voda Bauer’s other co-founder, joined, too), as Commercial Observer previously reported.
“We’ve been a great hunting ground, or fishing ground, for brokers,” Fano said to CO. “For a long time, brokers have walked the halls of WeWork looking for people who wanted to grow out. And that was fine because we didn’t have the product to serve them. But now, we can stay involved in the process. A lot of the times these were accounts that were already with us. They want to stay within WeWork but they want their own branded space.”
Of course, building a brokerage forces WeWork to reconcile with the fact that it may be a real estate company after all.
“We are in the real estate industry,” Fano said. “We don’t deny that. We love real estate. We just think the traditional real estate model is one that needed some rethinking. To say that we’re a real estate company is like saying Apple is an aluminum company because they consume a lot of aluminum. Ultimately we want to focus on the people and helping companies be successful.”
HQ is distinct from WeWork’s enterprise business, which caters to companies of 1,000 people or more, and from its traditional coworking enterprise that services outfits with 10 people or less. Separately, it also recently launched Powered by We, an office consulting service that manages the design and construction of offices for big corporate tenants. As was widely reported, it just nailed down a big contract to renovate UBS’ 100,000-square-foot offices in Weehawken, N.J.