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Global Coworking Giant Looking to Open in Lisbon
11 September 2018
WeWork – one of the largest coworking firms in the world, currently valued at $20 billion (€17 billion) – is looking for somewhere to open a space in Lisbon. The firm’s search began in January of this year but, eight months later, the company has yet to find anything suitable. However, according to industry consultants, the reason for this delay is not related to the lack of office space that has been affecting the country – mainly Lisbon and Porto – for more than two years.
According to a source close to the ongoing process, WeWork’s strategy of leasing spaces for its office centres is outside the norm for the Portuguese market and property owners have not been particularly receptive to the idea.
What is WeWork?
WeWork is a North American company, founded by Adam Neuman and Miguel McKelvey. Adam has always been involved in real estate and is the CEO of the firm, while Miguel, an architect, holds an executive position as creative director. The venture began in 2010 in Manhattan, New York, and eight years later, the firm has offices in 140 buildings in 28 countries and 78 cities, with nine more currently on the way. The company is present all over the world, from the USA, Brazil, France, Spain, Stockholm to less obvious locations such as Ho Chi Minh (the former Saigon) in Vietnam. The firm’s growth has been rapid, and currently, according to various reports about the company, WeWork is valued at 20 billion dollars (€17 billion). The good times are also expected to continue given that this year’s goal was to have another 600,000 m2 of office space under management in Europe.
The strategy of the New York-based company is not to lease the offices from the property owners but to create profit-sharing agreements. The assert that the company is profitable enough to generate a sufficient level of revenues to pay the owners more than they normally would receive based on simple rental agreements.
The problem is that, unlike in the case of rental agreements, which have assured monthly payments, owners would receive variable returns based on the offices’ occupancy rates. In other words, if there is limited demand for the space and relatively low take-up of the offices, the owner could potentially receive less than the market rate for the rental, or even nothing at all.
“They want a shared income agreement, but property owners in Portugal are still very conservative and have not been very receptive to this model. However, we believe that it is because the owners also have to think about the elevated risk. Even though WeWork guarantees that it always has sufficient returns to share, you never know until when it will start generating enough returns and what the take-up will be,” the same source, who prefers to remain anonymous, stated.
In fact, the recent growth in the number of start-ups, microenterprises with one or two employees and freelancers – many of them who work with online businesses that allow them to work remotely, anywhere in the world – has caused the interest in coworking, a model that can include flexible contractual commitments, to grow significantly. However, property owners fear that the demand may be inconsistent and fail to achieve sufficient returns to cover normal market rental costs.
Two or three possible sites
The idea of sharing income is not the only part of WeWork’s business model that is displeasing the Portuguese property owners. WeWork also asks the owners to invest in remodelling to make the offices comply with the requirements and image of the company, such as having very large areas and using lots of glass. That is, WeWork would not initially invest much in their operations in Portugal. Nevertheless, negotiations are still underway, and anything can change, and the company is very interested in starting operations in the country.
According to the same source, over the last eight months of searching, WeWork has become more receptive “not only to paying rent but also paying for some of the remodellings.”
Contacted by Expresso via e-mail, an official source at the American company declined to provide any information regarding the search. He limited himself to stating that “at this moment we have no news regarding our entry into Portugal.”
However, the company’s arrival in Portugal would still contribute to an increase in the, currently very limited, supply of offices – thereby allowing more new companies to start operations in the country offer space for the expansion of existing firms. Such an increase would contribute to the creation of more jobs. Moreover, WeWork’s goal is not to open a single office, but rather two or even three in the next two years.
The search for 5,000 square meters
As mentioned above, the reason why We Work is taking so long to enter Portugal has more to do with contractual requirements than with the fact that there are few offices to lease in the domestic market. However, this lack of supply is also having an impact, and a number of companies that are looking to start operations in Portugal are being affected. Google that took several months to finalise an agreement to open its offices in the Lagoas Park in Oeiras.
In the case of WeWork, the company is looking for a 4-5,000 square meter property in the centre of Lisbon – in the area of Baixa, Chiado, Avenida da Liberdade, Fontes Pereira de Melo and Saldanha – where supply is very tight, especially for spaces of that size. The company also wants a building that is just five or ten minutes away from the metro. However, WeWork is willing to share the space with other companies, as long as they are not direct competitors. There are already a few operating in Lisbon, such as Cowork in the Lx Factory, LACS, next to Rock Conde d’Óbidos, and Second Home, in Ribeira Market.
Original Story: Jornal Expresso – Ana Baptista
Photo: D.R.
Translation: Richard Turner