Real estate disruptor expands in Atlanta, Gov. Deal cuts ribbon on new office space in MidtownThe WeWork office at 1372 Peachtree St., in Midtown, unfolded a banner that references the company's motto: 'Create a world where people work to make a life, not just a living.' Credit: Kelly Jordan
Editor’s note: This story is updated with photos Kelly Jordan took Monday during the ribbon cutting ceremony at WeWork’s office in Midtown.
By David Pendered
You know a disruptor is in town when Gov. Nathan Deal and the Metro Atlanta Chamber’s top leader cut the ribbon on an office leasing location that charges tenants as little as $250 a month. And so it was Monday morning, as WeWork opened the second Midtown location of a company backed by a recent $4.4 billion investment from a Tokyo-based tech and telecom firm.
The co-working startup is so bullish on Atlanta that it sought a total of 11 permits this month from the Atlanta Police Department. WeWork wants permission to provide beer and wine, and to allow patrons to dance at its four locations – as it typically does elsewhere. Atlanta’s four WeWork spaces are along the Peachtree Street/Road corridor, two locations apiece in Midtown and Buckhead.
The company has a national and global footprint. Atlanta is one of 23 U.S. cities with at least one WeWork location. Eighteen foreign countries offer WeWork office space in a total of 36 cities, according to a page on the company’s website. The total footprint includes space for everything from a shared desk to a headquarters in a total 284 buildings in 59 cities – all opened by a company formed in 2010.
In barely eight years, WeWork’s market value has increased to up to $20 billion, according to a report by forbes.com. Investors want a piece of the action. But the $4.4 billion investment took the company off the table this year for an initial public offering, according to a report this month by wsj.com.
The outsized investor was SoftBank Group. SoftBank has emerged as a major investor in Silicon Valley companies. Just last week, SoftBank led a $9.3 billion deal to acquire 15 percent of the ride-share company Uber, according to a report by bloomberg.com and one by the Associated Press, via abcnews.go.com.
For some sectors of Atlanta’s commercial real estate market, this expansion by WeWork harkens to a moment in 2013. That’s when a single investor disrupted metro Atlanta’s entire housing industry by purchasing some 1,400 distressed houses in metro Atlanta. No one saw it coming.
Back then, local and national housing investors watched dumbfounded as Atlanta’s distressed housing market raced away from their financial reach. Blackstone Group LP had intervened, paying cash to purchase a national portfolio of houses in a strategy described as, “the biggest bulk purchase for the fledgling homes-for-lease industry,” according to a report in bloomberg.com.
This time, the market is office space tailored for digital entrepreneurs. And, again, it is a New York based company that is poised to gobble up the market.
This market is the niche of mobile digital entrepreneurs who often alight in a coffee shop to drink a cup and cruise on free wifi. Over time, perhaps as business grows, some need a more permanent location. Perhaps meetings are too difficult to convene in a noisy setting. Perhaps their business may have reached a point where they want to put down some roots. Shared space can be a good solution.
WeWork has the potential to disrupt the market in both co-shared space and, significantly, subleased commercial space. The latter occurs when an original tenant subleases space to another tenant, and retains the overall lease on the space.
In one Buckhead building where space is available in March, a sublease provides a 41 percent discount compared to market rate – $23 a square foot as opposed to $39 a square foot. The space is in the class A One Alliance Center, located across Lenox Road from Phipps Plaza, according to a rate quote on atlantasublease.com.
This isn’t to say that WeWork has cornered the market in Atlanta or even intends to corner the market.
However, the company does appear to have scaled a business model that consistently resonates with its target audience, according to some testimonials on the company’s website. WeWork promotes the notion that tenants become members of an international cadre of creatives who can reach out to others on the WeWork platform to talk through ideas.
WeWork also has an angel investing program. The next round for the Creator Award is Feb. 1 in Mexico City. The program is open to start-ups regardless of whether they are WeWork clients. Prize money of up to $360,000 is available in four categories. The only caveat appears to be that if a company goes public, WeWorks has the right to purchase stock in a future equity round, according to a description of the program.