WeWork’s recent woes raise questions about the company’s operations in Charlotte

WeWork’s recent woes raise questions about the company’s operations in Charlotte
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A little more than two years ago, WeWork made its North Carolina debut with two floors on College Street in Uptown. The co-working company has since expanded at a breakneck pace here and around the country.

Now with nearly 300,000 square feet of office space in the city, WeWork remains Charlotte’s biggest coworking operator, by far, despite a rush of smaller companies, some locally owned.

WeWork’s funky shared workspaces and perks provide a stark contrast to the boring buttoned-up office stereotype. Sleek, open-concept rooms with huge windows are filled with plush couches and custom artwork. There’s micro-roasted coffee and fruit water, along with high-speed internet and printing services.

Startups on a budget and large corporations alike rent office spaces from WeWork.

But the company made headlines recently for the wrong reasons. After investors decided the company was way overvalued, WeWork postponed its IPO in September. The company has laid off workers, and is expected to slow its expansion, raising questions about its future. Some industry experts believe WeWork may abandon some of its leases. Others say the company’s troubles may make developers wary of the overall co-working industry.

WeWork’s recent woes prompt the question: Does the company’s uncertain future spell trouble for its business in Charlotte?

Interviews with tenants, industry watchers, and brokers suggest the opposite. Not only is co-working alive and well in Charlotte, they say, but WeWork may actually want to keep growing here.

John Christenbury, managing director of tenant representation with Cushman & Wakefield, handled all of WeWork’s leases in Charlotte. Christenbury said he has not heard of any hesitancy from landlords.

“From everything I’ve seen, they’re very successful and over 90 percent occupied,” Christenbury said of WeWork in Charlotte.

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Beer taps in the kitchen of the WeWork at 128 S. Tryon St. uptown

For those unfamiliar with the company or the co-working industry: WeWork provides shared workspaces for tenants and often offers flexible lease terms, some as short as a month.

Rents are cheap — as low as $320 per month uptown, according to its website — which makes WeWork a viable option for startups and other small companies. Unlike at traditional offices, a hefty security deposit is not required.

Founded in 2010, WeWork opened its first Charlotte location in 2017 at Stonewall Station, 615 S. College St. A few months later, the company signed a lease to add another two floors, doubling its footprint in the building.

Last spring, WeWork opened a seven-floor, 150,000-square-foot office on South Tryon Street. It’s the company’s largest in the Southeast. In August, WeWork opened its third local office at the newly built RailYard in South End.

On the third floor of that new WeWork on a recent Friday, workers clad in jeans and sneakers huddle over their MacBooks and black WeWork coffee mugs. Little pods of desks are clustered around a pool table; outside on the terrace overlooking South End is a foosball table surrounded by colorful couches. There’s a bar in the corner of the spacious kitchen with taps of local craft beer.

WeWork recently opened at the nearly built RailYard development in South End

Employees at work at the new WeWork offices in South End

This is the space the digital mortgage lender Better.com will call home for the 1,000 employees it plans to hire in Charlotte over the next several years.

Better.com CEO Vishal Garg, a serial entrepreneur who started the student loan lender MyRichUncle in 2001, credits co-working spaces with helping his company grow. Better.com started out in WeWorks in New York, Orange County, and San Francisco.

“(Co-working spaces are) flexible, they’re cost effective and for us they’re really helpful … to scale really fast, get started really fast, and do so without really knowing how big we can get in any particular market,” Garg told the Agenda.

He continued: “We think WeWork’s challenges are specific to WeWork. I don’t think they’re emblematic of the whole space.”

Charlotte’s an attractive city for co-working for several reasons.

For one, it’s still relatively inexpensive compared to Washington or New York — despite the fact that office rents in Charlotte surged 27 percent over the last three years, among the fastest growing rates in the nation, according to a recent report from real estate company JLL.

Co-working space represents a smaller share of the total office inventory in Charlotte than in other major markets. Here it represents 1.7 percent of all office space; in San Francisco and New York it’s 3.6 percent.

In places like those, co-working has been a force in driving up office rents. But that hasn’t happened in Charlotte, says Alex Snyder, a senior analyst with the Pennsylvania firm CenterSquare who has studied both WeWork and Charlotte’s real estate market.

Snyder says a slowed expansion, or retreat, of WeWork is not as likely to be damaging here as it could be elsewhere.

“A market like Charlotte that has other demand drivers — and has been an extraordinarily strong office market, even without co-working — I really think that it will fare much better than, say, a major market like New York,” in the event that WeWork halts its growth, Snyder says.

Charlotte’s expanding tech industry, especially fintech, creates demand for flexible office space. The local fintech startup DealCloud operated out of co-working space at Packard Place for five years before moving into a permanent office in 2016.

Recent data from the the Charlotte Regional Business Alliance shows tech job growth has surged 34 percent over the past five years. The region is on pace to surpass the Triangle in the size of its local tech talent pool.

WeWork would not make a representative available for a call with the Agenda. In an emailed response to questions about the company’s local growth amid current headwinds, WeWork Southeast general manager Bobby Condon pointed to the company’s flexible workspace offerings as helpful to the growth of young companies.

“With a strong economy and thriving business ecosystem for growing companies, we remain deeply committed to our landlords and members in Charlotte,” Condon said.

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WeWork at 128 S. Tryon St. uptown

Other co-working companies are growing rapidly in Charlotte, too. Spaces and Serendipity Labs are two out-of-town operators that have opened their first Charlotte locations within the last two years.

Hygge and Advent are two homegrown coworking companies that both opened in 2015, and have expanded in the years since. CoCoTiv opened last year at Montford.

Dan Roselli opened Packard Place, the city’s oldest co-working company, in 2010. At the time, Roselli had to explain to people what co-working was.

“It’s good for our ecosystem to have a robust mix of co-working spaces,” Roselli said. But he adds that local startups should practice what they preach — by supporting other homegrown businesses. “Pause and reflect where you’re going with your dollars.”

The industry’s local future also looks bright: In August, Venture X signed a lease for 25,000 square feet of space near Ballantyne, the Charlotte Business Journal reported. It’s the first North Carolina location for the Florida-based co-working franchise. This month, a new local operator called Tabbris is scheduled to open a 23,000-square-foot co-working space in South End for creative startups. 

Even if WeWork does back out of leases, others would likely line up to take its place, Snyder said.

“If there was already a WeWork in there, then there already were all of these improvements,” he said. “So they’ll be able to say, ‘Hey look here’s a space that’s already been completely decked out. Hey Industrious, you guys want it?’ ”

Industrious is one of the national coworking companies that’s expanded quickly in Charlotte. The company opened in Uptown in 2017 and will soon add a NoDa location to bring its Charlotte operation to about 41,000 square feet.

Daniella Sloane, Industrious’s interim southeast area manager, says demand has been “pretty steady.” She declined, however, to comment on WeWork’s situation.

“We feel really comfortable that the co-working industry and flexible workspace industry is here to stay,” Sloan said.

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