Co-working competition heats up with global player WeWork taking premises in Auckland

Thursday, 13 February 2020

WeWork ANZ general manager Balder Tol says the company is targeting larger enterprises offering flexible contract lengths and tailored space as well as entrepreneurs and small businesses.

Embattled global co-working company WeWork is expanding into Auckland heating up competition in the emerging co-working sector.

The company has announced it is leasing 131 Queen Street in Auckland, a category 2 Heritage New Zealand listed building and once the home of the Milne & Choyce department store, from Krukziener Properties.

Krukziener Properties will earthquake strengthen and fit-out the eight-storey building for WeWork which will offer 8400 square metres of co-working and separate office space there to about 1300 'members'. The building is expected to open mid 2021.

WeWork says it has 34 per cent of the shared office market in Australia. Pictured is WeWork premises in Castlereagh Street, Sydney.

Even with that amount of space WeWork will trail the biggest Auckland CBD co-working company, Generator, owned by specialist inner city property developer and investor Precinct Properties.

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The heritage building at 131 Queen Street, the former home of the well-known department store Milne & Choyce, is being strengthened and refurbished to be WeWork's first office space in New Zealand.

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Generator had 14,100sqm of space in seven locations in the Auckland CBD as of May last year with another 1000sqm in the pipeline in the Wynyard Quarter, according to Bayleys Real Estate research.

WeWork's targeting the big end of town, established corporations and enterprises with several hundred workers globally, as well as smaller businesses and entrepreneurs.

10 Madden Street in the Wynyard Quarter is being developed by WeWork's biggest competitor Precinct Properties which will offer about 1000sqm of space for co-working there.

WeWork ANZ general manager Balder Tol said 'members' who took a hot or dedicated desk or office space were instantly connected to a global network of 662,000 members in 140 cities and 37 countries. That was a competitive advantage for WeWork in its offering.

It also offered flexible contracts to enable companies to scale up or down. Companies were saying in a fast moving world they could not forecast employee requirements more than 18 months out but traditional leases required commitments for 5 to 10 years.

WeWork offered flexible contracts and tailored office space for as little as 2 people to space for many more people. That was a key point of difference between it and other players, Tol said.

Members were carefully curated to ensure a diversity of businesses and industries to allow trust to develop between businesses. That diversity and network was a powerful part of its offering, Tol said.

Over 40 per cent of its members world-wide were enterprise organisations. The 40 per cent was calculated by counting each employee of the enterprise.

Asked about reported troubles at WeWork and the exit of the charismatic founder and chief executive Adam Neumann, Tol said WeWork, one of the 'verticals' in the We Company group, was focused on growth and profitability.

In Australia it had built a strong business in three years, starting first in Sydney and then Melbourne and more recently expanding into Brisbane and Perth.

Across Australia it had 34 per cent of the co-working and shared office market and was the biggest player, Tol said. The average commitment across all members in Australia was more than 17 months.

In October 2019 big Japanese investor SoftBank struck a deal to take control of WeWork after WeWork withdrew its offer of shares to the public, following revelations in its prospectus of a US$900m loss, CNBC, an American pay television business news channel, reported.

CNBC reported this week that WeWork's chairman, Marcelo Claure, said it was 'totally false' that the ousted chief executive of WeWork, Adam Neumann, left the company with US$1 billion package, as earlier reported by CNBC.

Claure, a top SoftBank Group officer, said WeWork was aiming to be profitable by a key measure by 2021 and have positive free cash flow by 2022.

Other substantial players in the Auckland co-working market are global company IWG which is planning to launch under its 'Spaces' brand 2700sqm of co-working space next week in Karangahape Road. It has also taken about 2660sqm in Precinct Properties' new Commercial Bay development and 1200sqm at the new 155 Fanshawe Street building, under construction.

Two years ago IWG bought the locally-grown co-working business Bizdojo which had 4876sqm in five locations in Auckland at May last year, Bayleys research said.

The other large player, but not in the Auckland CBD, was Smales family-owned B:Hive on the North Shore with 12,000sqm.

Bayleys commercial and industrial director Lloyd Budd said the Auckland co-working market was quite tight with the big co-working operators having more than 80 per cent occupancy. Co-working space was less than 2 per cent of the Auckland office market, compared with about 5 per cent in Sydney and Melbourne.