There's one more oink in the WeWork pig...
The 'hotelification' of workplaces is set to start
|Aug 18|| 5||2|
This week it’s been impossible to escape the ‘End of Cities’ narrative. It’s been everywhere across the English speaking world. (stories of people fleeing London, New York, San Francisco) It’s no doubt a consequence of two big trends. Firstly, despite all of the 2020 disruption knowledge work has been going relatively smoothly as a remote activity. Secondly, if you’ve made it into a city centre in the last couple of months they have a tragic desolation. There’s a zombie apocalypse air to the ghostly streets.
Many of us have observed first hand how it didn’t need the High Street losing all of its business to become unviable - cream off the top 20% of an ecosystem and the rippling shock waves often end up sweeping more victims away. And this is one of the potential consequences for business districts right now. Collectively there is growing certainty that cities will be quieter. And if commuter traffic halves then the number of sandwich bars needed will inevitably halve too, retail stores will be less popular, restaurants won’t be in as much demand.
This isn’t to say there won’t be offices in city centres - far from it. In the last two weeks firms with money in their pockets have been mopping up some prime deals. Today, Amazon bought up 2000 new desk spaces in New York and last week, Facebook also snapped up a vast new Manhattan space. The office still has a massive part to play - for bringing colleagues together and representing ourselves to other firms.
But the exodus from cities is a real-enough trend that is already starting to be seen in the data. Anyone doubting that metropolitan property demand is changing should follow the Twitter feed of freelance journalist, Dan Farey-Jones. Dan is providing a daily update of the evidence he’s gathering on the changing demand and supply for London property.
And this will soon mount up, Morgan Stanley believes a quarter of all office space looks set to be empty. (This stat is dizzying if you think about it. City centres have been decimated by the decline of retail, what will they look like with a quarter of the offices empty?)
Amidst all of the noise, what *is* the emerging story? The role of an office is becoming clearer on a weekly basis - but how to best possess one is up for discussion. It’s possible for example that we might yet see life in the old WeWork dog.
At the end of 2019, it was hard not to be gripped by the extraordinary undoing that was taking place at WeWork. The commentary was gripping, a semi mystical boss had managed to hoodwink his main investors Softbank to the Ponzi Scheme he’d been running under the veneer of a co-working cult.
The tragedy wasn’t that the investors would lose their money. Most of Softbank’s money comes from the proceeds of burning Saudi-drilled carbon, but the workers there seemed to be deeply unfortunate victims of the scam - I had the good fortune to present at a WeWork team meeting down in Victoria last year. The WeWorkers were brilliant optimists, excited that they were creating something of real value, sadly they were victims of gaslighting by a narcissistic boss.
If you’re in London, Manchester, Birmingham or even New York, most people have known someone who worked at a WeWork location. It wasn’t just start-ups, someone I know in the armed forces works out of one, whole masses of employees from big corporates found themselves in WeWork locations as their bosses tried to channel the fresh entrepreneurial spirit that came with the espresso bar and ping pong tables. I recorded 4 podcast interviews with people who worked in different WeWork branches because I was interested what company culture would be like when different firms’ teams huddled together at the prosecco tap three nights a week. (Would company culture take a backseat to people feeling part of a broader cohort of people their own age - albeit at rival firms?)
But despite all of WeWork’s woes it’s hard not to look at their business proposition and see it as more timely than ever before. Over the last few weeks’ newsletters we’ve been wrestling with understanding how firms are planning a return to the office - and what it will look like. It comes down to balancing the desire for a return to collegiate collaboration with wanting to recognise that the world has changed. On the first point there is a growing consensus of people saying that work doesn’t feel the same. Firms are increasingly vocal in wanting to renew a sense of cohesive connection amongst colleagues. (This came out loud and clear in the two podcasts on this last week: one, two)
The second part is a recognition that we don’t want to go back to 5 days of commuting. In every single survey that has been published in the last few months it is clear that workers don’t want to go back to losing so much time to travel - and it will be an important factor in how they view prospective employers in the future. (Some surveys here, here, here, here and here) Of course, some traditionalist bosses will demand a full-time return to the office but it will make them increasingly less appealing to workers - and additional it will start to seem extravagantly expensive as time goes on.
But this is where WeWork comes in. Many of those in the commercial property sector talk about the future of the office being as ‘Space as a Service’ or the hotelification of office space. Companies will increasingly hire a space for what it does rather than just an empty shell of an office space that needs filling. As firms are toying with two days a week in the office, or maybe a Tuesday, Wednesday and Thursday model they are also having to work out what they will do with their rented space for the rest of the time. They’ll either have different teams in on different days (with a smaller total footprint) or will see their current space is vastly underused. Over time shareholders will rightly question if the firm couldn’t eliminate 5% of their overheads with a few simple tweaks.
On this basis the WeWork hotelification of office space opportunity looks bigger and better than ever. To be fair there are possibly other firms, like Convene and Fora who might be even better placed. The idea is that client renters will hire space on a modular basis as their needs fit. Pricing will be set up to make Mondays and Fridays fabulously appealing, Wednesdays and Thursdays quickly becoming peak. Pretty soon firms will be able to provide their workers with a pass to use a set WeWork style location five days a week with booked meeting spaces on the key days. Inevitably on a cost basis some companies will choose to have an office five days a week - and will rotate which teams use it when. The sales team in on Mondays and Fridays to drive revenue - and meet customers for example.
Alternative some firms could choose to have the exclusive use of a space - with a suite of accompanying meeting rooms - on certain key days and then give them to other firms for the rest of the week. Lockers - and small assigned office hubs - across the space will allow a degree of personalisation. Of course this won’t be tied to a single location. Location can adapt to use case. What about if the product team uses an ideation space every Wednesday? What about if the marketing team used high-end audience research labs every Thursday night?
It’s certainly true that some firms will opt out of these changes. As Antony Slumbers says, it will be a bell-curve distribution.
The firms that do opt to work in a different way are likely also to be those who are more willing to embrace innovation and new opportunities. It’s almost self-selecting that the most dextrous (maybe newer) firms will change and the slower ones will resist. The firms with smaller offices will be more able to spend their budget hiring superstar talent - almost compounding their advantage.
There’s no doubt that property firms will be seeking to innovate quickly to fulfil this customer change. If Morgan Stanley is right and the demand for offices drops by a quarter there will be winners and losers. Firms moving to adapt their space to their new culture is going to be big business for the winning firms.
Listen to Antony Slumbers on Eat Sleep Work Repeat.
Over the last few weeks dozens of people have got in touch with me. ‘I know that you’re saying that the world has changed its views and home-working is here to stay, but my boss/the board doesn’t agree and we’re going back 5 days a week from September’.
They normally sign off with something like, ‘Please! What can I send them to make them change their mind?’
I’ve started gathering some of the evidence on this page. (Send me anything you think needs adding by replying to this email and I’ll credit you).
Listening: Forbes magazine calls Gary Hamel the world’s leading expert on business strategy. Wall Street Journal called him the world’s number one business thinker. But he’d never managed to secure an interview on Eat Sleep Work Repeat. Not until today. Massive for him. More about Hamel’s Bureaucracy Index.
Make Work Better is created by Bruce Daisley, workplace culture enthusiast. You can find more about Bruce’s book, podcast and writing at the Eat Sleep Work Repeat website. If you’re ready to reinvent your work and your colleagues are dragging their feet then get in touch!