World's Biggest Companies Plan to Get Down with WeWork Effect

November 19, 2018

World's Biggest Companies Plan to Get Down with WeWork Effect

The biggest employers on the planet see a future filled with free beer and new age motivational posters. Their offices will need to catch up. After WeWork Cos reinvented the office experience for freelancers and start-ups, large businesses see their use of flexible space rocketing over the next three years, according to a survey of global companies with 3.5 million employees by broker Knight Frank LLP. More than half of them expect the non-traditional space to account for at least a fifth of the total compared with about 5 percent now. “WeWork has changed the narrative around corporate real estate,” said Lee Elliot, global head of occupier research at Knight Frank, who led the survey. As well as seeking more flexibility, big businesses will increasingly look for “amenity-rich environments that help their employees with the challenges of modern work.” The shift presents a major challenge to the world’s biggest landlords, which have traditionally focused on securing long-term leases to maximize the value of buildings and reduce the risk of vacancies. In London, landlords including British Land Co., Great Portland Estates Plc and the Crown Estate Ltd. have begun using some of their buildings as flexible spaces in response to changing demand. “Average central London lease lengths are now about seven and a half years,” Elliot said. “That’s at least two or three planning cycles for most business now.” He expects the share of space on flexible leases in London to rise to between 7 percent and 10 percent over the next few years from almost 5 percent now. As big business becomes more focused on hiring and keeping talented staff, their offices become more of tool to improve recruitment and productivity. Paying higher rents for high-quality or flexible spaces offered by co-working companies may prove cheaper than constantly replacing unhappy and unproductive staff, Knight Frank researches said. Shorter leases also allow employers to be more flexible in an age when technological change is reshaping entire industries ever more rapidly. WeWork, backed by Softbank Group Corp., has expanded at a breakneck pace since it was founded in 2010, offering clients perks like community spaces, free beer and coffee and a global network. After starting with a focus on startups and entrepreneurs, it now designs offices for larger enterprises. Big banks including Citigroup Inc, HSBC Holdings Plc and Deutsche Bank AG have begun placing some teams, often focused on technology, in co-working or trendier office space outside their main headquarters. Morgan Stanley last month hired its first chief medical officer in a sign of how big business is becoming more focused on employee well-being and its impact on productivity. (Bloomberg)

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WeWork Gobbles up Another 120K Square Feet

WeWork has called dibs on two more locations in the Mile High City. The New York-based coworking company has signed leases in LoHi at the Circa building at 1615 Platte St. and in RiNo at Revolution360, a development planned at 3600 Brighton Blvd. Both leases are 60,000 square feet, according to a source with knowledge of the deals. WeWork is taking the second and third floor at the Circa building, joining accounting software company Xero, which occupies the fourth floor. Unico finished the five-story building, which includes ground-floor retail space, earlier this year. The new location is located on the same block as The Lab on Platte at 2420 17th St., where WeWork leases 50,000 square feet. That building sold for $46 million this month. As for WeWork’s second new lease, Revolution360 is a five-story office-and-retail building proposed for 3600 Brighton Blvd. The developers purchased the property in 2016 for $3.75 million. A spokeswoman for the developers said Monday that Revolution360 is expected to open in the second quarter of 2020. Prior to this week, WeWork had signed leases in three Denver buildings in 2018, at the Tabor Center, Wells Fargo Center, and the soon-to-be-completed The Hub in RiNo. Part of the company’s growth is attributed to luring enterprise clients, or companies that take big chunks of space, away from traditional office space. Amazon, Verizon, Denver-based FullContact and software company Effective all have signed on at WeWork’s Tabor Center location. WeWork is the No. 2 private office user in downtown Denver. With its lease at Circa, WeWork now controls 492,150 square feet of downtown office, compared to DaVita, the largest office user with more than 560,000 square feet. (BusinessDen)

Amazon Selects New York City and Northern Virginia for New HQs

Amazon selected New York City and Arlington, VA as the locations for the company’s new headquarters. The e-commerce giant plans to invest $5 billion in building the pair of 4-million-square-foot facilities, and expects to create more than 50,000 jobs across the two new HQ locations. The new HQs will join Seattle as the company’s three North American headquarters. The new Washington, D.C. metro headquarters in Arlington will be located in National Landing in Northern Virginia, and the New York City HQ will be located in the Long Island City neighborhood in Queens. The facilities are each planned for four million square feet of office space, with an opportunity to expand to eight million square feet. Amazon’s Jeff Bezos says, “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come. The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.” Amazon also selected a site in downtown Nashville for a new one-million-square-foot Center of Excellence for its Operations business, which is responsible for the company’s customer fulfillment, transportation, supply chain, and other similar activities. Amazon will receive performance-based direct incentives of $1.525 billion, based on the company creating 25,000 jobs in Long Island City. This includes a refundable tax credit through New York State’s Excelsior Program of up to $1.2 billion calculated as a percentage of the salaries Amazon expects to pay employees over the next 10 years, which equates to $48,000 per job for 25,000 jobs, with an average wage of over $150,000; and a cash grant from Empire State Development of $325 million, based on the square footage of buildings occupied in the next 10 years. Amazon will receive performance-based direct incentives of $573 million, based on the company creating 25,000 jobs with an average wage of over $150,000 in Arlington. This includes a workforce cash grant from the Commonwealth of Virginia of up to $550 million, based on $22,000 for each job created over the next 12 years. (Connect Daily)

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