At 1601 Market St. in Center City, WeWork operates a bustling co-working space for start-ups and established companies alike.
Prices for a “hot spot” at this location run $350 a month for one person. A closed-space office for two people costs $1,240 a month. In Philly, WeWork has 93 percent occupancy with over 500 companies in its space of roughly 110,000 square feet and 2,500 desks.
In 2007, Indy Hall in Old City was the only co-working space in Philadelphia. More than a decade later, it’s one of about two dozen co-working spaces in the city, with still more sites opening across South Jersey and the Philadelphia suburbs. Bond Collective’s Bond Station House became one of the city’s newest co-working competitors, opening this year at 1617 JFK Blvd. directly above Suburban Station and steps away from LOVE Park. Prices there also start at $350 a month.
WeWork, which announced last week that it would rebrand itself as the We Company, is one of the coworking industry’s global stars. With a stunning $40 billion-plus valuation and backing from Japan’s SoftBank Group, WeWork now has expanded into three business lines -- office space along with small residential and education units. WeWork is planning to sell its shares to the public in 2019. It maintains locations in 83 cities as of the third quarter of 2018, and claims to be the biggest private office user in Manhattan, London and Washington.
WeWork may be “the most influential and fastest-growing firm in the co-working space,” Cushman & Wakefield’s latest report on the co-working space notes. That’s because during the first half of 2018, WeWork created eight times as much newly leased space in the U.S. as the other nine largest firms combined.
By the close of the second quarter of 2018, WeWork had nearly 200 locations in the U.S. alone and is reported to be priced at over 20 times the current $2 billion valuation of Regus, the world’s largest provider of flexible office space.
But will WeWork’s sky-high valuation stand up in a recession? Its share of the co-working market -- fitted out, communal office space on short-term leases -- could easily triple from its current 2 percent of the market over the next decade, Cushman & Wakefield said.
But SoftBank, one of WeWork’s largest investors, this month scaled back its latest investment in the company. SoftBank opted to invest just $2 billion in WeWork, a fraction of the $16 billion that SoftBank floated late last year for a controlling stake.
In Philadelphia, WeWork has locations at 1010 North Hancock in Northern Liberties along with 1601 Market, 1900 Market, and 1430 Walnut in Center City.
So how is WeWork attracting and keeping tenants in an increasingly competitive Philadelphia market?
One target market is veterans. WeWork partnered with Bunker Labs to create "an ecosystem where veterans transitioning out of military can enter into a program that supports their entrepreneurial dreams,” said Lex Miller, director of operations for the Northeast and Mid-Atlantic at WeWork. “Whether you’re starting a new venture, growing an existing business, or looking to build your local and global network, WeWork Veterans in Residence empowers transitioning service members to create.”
The WeWork Veterans in Residence program is a free six-month co-working space where veterans can pursue start-ups among others.
WeWork Veterans in Residence, incubated in Denver in the summer of 2017, is aimed at helping vets and family members start a new venture, grow an existing business, or build local and global networks. The program has grown to 14 cities across the U.S. and 250 current and alumni Veterans in Residence.
At the 19th-floor co-working space in Philly, ZeroEyes is raising money and aiming to partner with the Philadelphia School District. Started by a group of former SEALs, Zero Eyes is developing an artificial-intelligence product aimed at alerting first responders in school shootings.
“ZeroEyes is an intelligent video analytics company. Powered by AI, our technology can detect weapons and recognize faces in real time,” said Rob Huberty, ZeroEyes' executive vice president for schools. "Once weapons or persons of interest are in view of camera, our platform sends alerts that lock doors and provides first responders the description and location of threat.”
Why set up at WeWork? The space was free -- at least for a period of the residency.
“We regularly set up meetings that allow us to be taken seriously in a WeWork space. Instead of meeting at our CEO’s basement, we can have a professional atmosphere,” Huberty said.
"We’ve been introduced to investors, people that will help with our marketing, competitions that give us national exposure. This experience has been invaluable as we start up.”
Same for CEO Brenden Coleman, who cofounded NativX, an app that “allows you to eat and drink like a local by providing suggestions of the best spots around Philly from the people who know it best, our community of natives.” The app is currently available in the Apple app store. Natives listed on the app include PhillyImmersion for coffee shops; PhillyFoodLove, a popular Instagram foodie in Philly; and PhillyBeerCam for craft beer.
Coleman signed up for the veterans cohort because of the camaraderie. "I played sports all my life, so it’s easy to make comparisons. When I practiced, I always made sure to have others with me to push each other to work harder. When starting a business, there’s always times when you feel burnt out and want to let up, but having a program like WeWork Veterans in Residence, when I get into the office and see others in the program grinding, it lights a fire under me to get after it.”
After serving in Iraq, Entegrit founder Will Woldenberg started a veteran-owned management consulting firm certified as a B-Corp., meaning that it’s transparent and highly accountable for social and environmental performance.
“The WeWork space has been great,” Woldenberg said. “We find that the hustle and bustle of our location motivates us to go the extra step during the workday. There’s a core group of Philadelphia veterans present on a daily basis and we push one another to expand our businesses.”
Following the free space lease, Entegrit stayed at WeWork’s 1601 Market offices and signed a lease for a two-person office, priced at $1,400 a month.
ZeroEyes, on the other hand, needs more space than it can afford at WeWork. The start-up will be moving in 2019, said president and CEO Mike Lahiff. ZeroEyes is looking at space in Jenkintown, Conshohocken, and King of Prussia.
“For the space we need, we are seeing prices at around $2,000 to $3,000 a month,” Lahiff said, for his 11 employees and computers. ZeroEyes wants roughly 1,200 square feet plus 150 more for its servers. It’s currently looking at houses renovated for commercial use.
Converting vets and other start-ups into long-term tenants could really help WeWork. On average, 250,000 active-duty service members leave the military every year. Of those, 25 percent want to start a business, but only 4.5 percent of post-9/11 veterans have started one, according to WeWork.
What’s more, only 27 percent of WeWork’s national Veterans in Residence are female, although that’s almost double the number of female recruits in the military. Over 40 percent of the vet demographic cohort is under the age of 34.
Cofounder Austin Cinalli says NativX hasn’t renewed a lease yet, “but we are considering it once our cohort ends at the end of January. I know they offer a discount” of 15 percent to vets. Plus, WeWork’s location has helped the company’s growth.
“We have directly gotten app downloads from being part of the WeWork community and are hosting an event, Battle of the Brews,” on Thursday, Jan. 24, at WeWork’s Northern Liberties location.
Woldenberg, for his part, says a lease is a lease.
“We chose to stay [at WeWork] after looking at the commercial rental market," he said. "We’re growing and needed a flexible location to handle our growth while still providing a comfortable experience. And at this point, we still wanted to have other businesses working in close proximity. There’s a vibrancy in the office that we wouldn’t get at our own space and so some of our internal culture as a company is shaped by working at WeWork. But at some point, we will be big enough that we will need our own office in a Center City location, one where we can dictate design, form, function, and employee perks.”