January 7, 2019 - 4:19 pm
A big player in offering coworking space across the globe is making its first move in the Las Vegas Valley.
New York-based WeWork, the largest office tenant in Manhattan and a global leader in the coworking sector, is planning to take up its first footprint in the valley: about 50,000 square feet of space at the newly built Two Summerlin office building in Downtown Summerlin.
In a statement, WeWork officials said the company plans to occupy the second and third floors of the office tower starting in the spring. The brand has expanded rapidly with a major focus on community building at its hundreds of open, collaborative-style spaces across the globe.
“WeWork is a platform for creators that provides the space, services and community to help people make a life, not just a living,” said Nathan Lenahan, general manager for WeWork’s Texas and Mountain West Region. “With 320,000 members around the world, people from different industries and walks of life help each other’s businesses thrive by sharing advice, business ideas and even services.”
The company’s new location will be able to serve some 960 members, from freelancers to startups to Fortune 500 companies. The potential added members also can do work at any of WeWork’s 335 locations it holds, globally.
WeWork’s space will bring a different style not yet seen in Las Vegas.
“Its definitely a different style for environment from a user standpoint, much more open, nice, superhigh-end finishes; kind of feels like you’re in a coffee shop or a very hipster-type place but also gets you involved in their network,” said Dan Palmeri, a senior director at Cushman & Wakefield’s Las Vegas office.
“In addition to all of the beautifully designed communal areas and private offices, WeWork Two Summerlin will feature a classroom, which provides a unique space to host a large corporate meetings or collaborative working sessions with your company,” a release from WeWork said.
WeWork brings its community-building aspect to Las Vegas.
“WeWork as a concept also has a lot of planned events and activities to get their members socializing,” said Taber Thill, a senior vice president at Colliers International Las Vegas.
Patti Dillon, a senior vice president in Colliers International Las Vegas’ office division, added: “There’s a social aspect to WeWork, where they have monthly events for their tenants to participate in and network with one another to help them do business with one another.”
Coworking in Vegas, beyond
The Las Vegas market isn’t without competition to WeWork.
A company known as Regus, held under Switzerland-headquartered IWG (formerly known as Regus PLC) group of companies, has several locations in Las Vegas. Regus is a major competitor of WeWork’s network.
According to Regus’ website, the company has 3,000 locations in 120 countries.
Regus has more than a dozen locations in the Las Vegas area, including in high-demand areas such as Summerlin. Some of Regus’ locations include Tivoli Village and Town Square, with options for users in the Green Valley area and along the 215 Beltway and other locations near the Strip.
Palmeri said that WeWork “came out kind of competing with Regus and traditional executive suite operators but taking it to, I think, a bigger level of trying to understand what the tenant and office users really want out of their space.”
“It makes people want to go work there,” Palmeri added. “You enjoy where you work; it’s a totally different environment from what you’ve always been used to, and it provides a lot of flexibility in the way of shorter lease terms, if you need to expand right away, contract right away.”
Palmeri added that items such as furniture are provided to members of WeWork, with a receptionist and several other services.
WeWork, a privately held company, was launched in 2010 by co-founders Adam Neumann and Miguel McKelvey in New York City. WeWork has over 8,000 employees at its more than 300 global locations.
Prices start at $45 a month for an on-demand membership; shared workspace memberships start at $190 per month. For users looking for a private office, those plans start at $450 a month, according to the company’s website.
Coworking space has been around for a number of years — the Regus label was launched in 1989 — but it has grown in popularity and in footprint in the past few years in the United States.
According to an August report by Cushman & Wakefield, 50 percent of the coworking square footage in the United States opened during a period stretching from mid-2015 through the first quarter of 2018.
Overall, however, coworking only makes up 1 percent “of the total 5 billion square feet of office inventory across the 87 markets tracked by Cushman & Wakefield,” the report said.
In some gateway cities such as Manhattan, that number is just below 3 percent, with other gateway cities carrying a range of 1 percent to 3 percent, according to the report. Roughly 50 percent of the overall coworking footprint in the United States is in six cities, according to the report: Manhattan, Los Angeles, San Francisco, Chicago, the District of Columbia metro area and Boston.
Cushman’s chart on Current National Occupancy by Provider showed that Regus was the largest holder of coworking space at a national level with 32 percent of the U.S. market.
IWG, which holds the Regus label, also holds 3 percent on top of that with its company called Spaces, according to Cushman’s chart.
WeWork held 28 percent of the U.S. coworking market as of mid-2018.
The remainder of the market was held by Premier Business Centers (3 percent) and Knotel (2 percent) with the remainder of the companies in operation in the United States holding 32 percent as of mid-2018, according to the chart that cited data from Cushman & Wakefield Research and CoStar Group.
According to a chart on leasing activity from 2014 to mid-2018 of the top 10 providers of coworking space in the United States by Cushman, WeWork has been well ahead on its leasing activity than other major competing companies since 2015.
In 2015, WeWork added more than 3 million square feet to its portfolio as Regus added over 1 million. Overall, coworking operators picked up roughly 4.5 million square feet in 2015.
WeWork’s domination on leasing activity continued in 2016 through mid-2018, though the amount of overall square footage being taken up by coworking companies was less than it was in 2015, as compared with 2016-2017, a chart in a Cushman & Wakefield report showed. Leasing activity in each year from 2015-2017 was higher than it was in 2014.
WeWork has had some major backers come behind it. In August 2017, Japanese conglomerate SoftBank invested $4.4 billion in the company. In November, WeWork announced an additional investment of $3 billion by SoftBank.
With WeWork’s rate of growth, Thill expects that Las Vegas could see more space taken up by the area’s newest tenant.
The overall Las Vegas market itself has been recovering over the past several quarters. Vacancy across Las Vegas metro area fell to 14.5 percent in the third quarter of 2018. That was the lowest level in a decade, Thill said.
Office space vacancy in the Las Vegas metropolitan area was down 1 percent from the third quarter of 2017 (15.5 percent). The average asking rents per square foot at full gross services in the metro area sat at $2.10 per square foot in the third quarter of 2018, compared with $2.01 per square foot a year earlier, according to a report by Collier International Las Vegas.
Areas along the 215 Beltway in the southwest and Summerlin have experienced lower vacancy rates and higher rents for office tenants.
Culture and cost
A premium does exist for coworking space.
“Typically, it’s 50 to 100 percent times what traditional office space will cost,” Palmeri said. “Again, with that, you get the flexibility, you’re not coming out of pocket for a lot of those upfront expenses, etc., and you get to be part of their network.”
Even with the premium, larger occupiers are moving into coworking spaces. Some of names WeWork has worked with include Microsoft, Citigroup, BlackRock and others.
Palmeri said that the WeWork model doesn’t work for all companies.
“Some companies, the rent really doesn’t matter,” Palmeri said. “They’re big enough to where it’s more of that culture and environment shift from an employee recruitment and retention standpoint, and some companies it just doesn’t make sense — especially startups.”
Palmeri said that “startups like to go into those because of the flexibility; but startups, their biggest thing is save money and make money, and sometimes traditional office space or a sublease somewhere else makes way more sense.”
“I think it’s great for the community,” Palmeri said. “I think it’s a sign that shows that our city is being looked at in a different perspective from people that don’t live here. It’s more of an up-and-coming American city that’s really going to transform into a place where more people want to do business when you have these big national tenants coming here and staying here and growing here. We’re going to start getting looked at in a different limelight.”