This article is from the Australian Property Journal archive
LOCAL flexible workspace provider The Commons has plans to open another five locations in the next 12 months, as it reports record revenue of $45 million and turns a tidy profit, while one-time market leader WeWork teeters on the brink of collapse.
New York-based WeWork, which attempted an aggressive global rollout that saw it haemorrhaging money, warned this week there is “substantial doubt” over whether it can remain in business due to its losses and need for more cash to stay afloat.
“The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real estate portfolio optimisation efforts, and maintaining a disciplined approach to reducing operating costs,” said interim CEO David Tolley.
Tolley said WeWork had struggled in recent months from “excess supply in commercial real estate” and “softer demand”, with economic volatility causing tenants to end their leases.
WeWork was valued at US$47 billion in 2019 before then-CEO and founder, Adam Newmann’s erratic behaviour and spending started raising concerns, and a public float failed, sending its value plummeting. It was bailed out by Japanese investment group SoftBank, which has sunk tens of billions of dollars in the company.
WeWork lost $349 million in the June quarter – and that result was a $238 million improvement on the first three months of the year. After finally going public in October 2021, its share price has been all but wiped to 13c this week, valuing the company at about US$260 million.
“Flexible workspaces have a future in the office ecosystem, but WeWork, in its current state, may not,” wrote BTIG analysts wrote
WeWork has more than 600 locations across 33 countries.
Its rival IWG, which operates the Regus and Spaces brands, this week reported record revenues and more than a doubling of operating profits in the first half of 2023 to £94 million, a period in which it signed up for 400 new locations. Its system-wide revenues rose 14% year-on-year to £1.7 billion.
“We continue to be well placed to deliver further revenue, profitable growth and reducing leverage as more companies permanently embrace hybrid working as their preferred model with IWG set to be the biggest beneficiary,” IWG’s chief executive Mark Dixon said.
Meanwhile, local operator The Commons’ revenue has surged by 83.15% and its co-founders Cliff Ho and Tom Ye expect it to grow to $74.8 million by the end of 2024.
The five new locations will take its expanding portfolio to a total of 15 sites across Melbourne and Sydney since being established in 2016, including five new sites since 2020 when the pandemic upended the traditional notions of the office-as-workplace. Last year it opened its $13 million flagship at 388 George Street in the Sydney CBD, setting a record investment for shared workspaces in the city.
The Commons is on track to turn an $8.9 million profit as it enjoys occupancy rates above 90% across its 56,000 sqm portfolio,
Ho said the co-working sector is coming to a point of maturation, bouncing back from the pandemic while the broader commercial market continues to face headwinds.
“We have seen strong demand from traditional office tenants downsizing to a more flexible arrangement. With The Commons, they gain a turnkey solution, flexible terms and a better culture for those employees wanting to utilise the office,” he says.
He said that with a wait list to sign up at the majority of its venues, the company’s ongoing challenge is the sustainable management of its growth trajectory, without compromise on its standard of amenity and service provision.
“We love what we do, and we want to do it for a long time. That means taking on a measured approach to business expansion, taking on a small number of new sites at a time to avoid the pitfalls of rapid growth that to date has attracted criticism of the co-working sector,” Ho said.
The Commons has attracted major companies PayPal, Spotify, Broadsheet and Wise. Membership numbers have skyrocketed by 178% over a year to more than 7,000.
