Flex is not dead: Why WeWork's collapse won't spell the end of the industry
February 21 2024 - 9:43PM
JCN Newswire
WeWork, a company once valued at US$47 billion, has filed for
bankruptcy in the U.S.. While such high-profile situations can
potentially cast a shadow over the industry's outlook, we at The
Executive Centre (TEC) maintain our confidence that premium,
innovative flexible workspace solutions continue to be in high
demand.
Boosted by evolving corporate strategies and a renewed appreciation
for workplace flexibility, the current landscape presents a fertile
ground for high-quality flexible offices, tailored to the unique
needs of the modern workforce.
This whitepaper aims to provide insights into the flexible
workspace industry in Asia-Pacific (APAC), and to debunk the
misconception of a downturn in demand, which might lead us to
overlook the sector's broader, positive growth trajectory.
The Reason WeWork Went Down
WeWork's downfall is a classic example of overambition clashing
with market realities. From a mission that pledged to 'elevate the
world's consciousness' to excessive expansions and mismanagement, a
series of strategic missteps precipitated its collapse:
-- Overexpansion without Sufficient Demand: WeWork's rapid growth
strategy was fundamentally flawed. The company expanded
aggressively across the globe, opening new locations at a breakneck
pace. This expansion was driven more by the desire for quick
scaling rather than actual market demand. Consequently, many of
their spaces remained underutilised, draining resources without
generating consistent profits throughout the business'
lifespan.
-- Financial Mismanagement and Governance Issues: WeWork also
grappled with financial mishandling and governance problems. Its
leadership faced criticism for opaque decision-making and
misallocation of funds, leading to a loss of investor trust and
market confidence.
The company's failed IPO in 2019 marked a turning point, shedding
light on its overvaluation and questionable governance practices.
WeWork's valuation plummeted from US$47 billion to a fraction of
that, causing a major leadership overhaul and a shift in business
strategy. However, the detrimental effects have already taken
hold.
WeWork serves as a cautionary tale demonstrating that rapid,
unchecked expansion without a demand-led strategy and solid
governance can lead to significant business challenges.
Paul Salnikow, Founder and CEO of The Executive Centre said "With
WeWork now in Chapter 11 and with many global commercial real
estate markets in recession, any operator who is not profitable has
only a slim chance of remaining in business. As hundreds of WeWork
centres, along with numerous operator-run centres are closing,
there has been a noticeable decrease in the capacity of low-grade
coworking spaces, which gradually reduces the supply of low-grade
flex space."
"In contrast, The Executive Centre, which operates with centres in
Asia, Australia, and the Middle East, has expanded its network by
60% to 200+ locations since 2019. We have done this by continuing
to understand that we are a service business, focusing on
delivering truly premium flex accommodation to its now 47,000+
clients.
Smart operators continue to benefit from high demand for flex
workspace in APAC
Looking beyond WeWork's woes, the demand for flexible office and
coworking spaces has never been higher, powered by post-pandemic
hybrid working models, and companies' need to be fully flexible in
their commercial real estate commitments.
Companies across APAC are increasingly adopting hybrid work models,
with a growing trend among large corporations to incorporate flex
spaces into their workplace strategies. This shift is driven by the
desire to reduce fixed asset obligations and provide employees with
diverse, stimulating environments. Flexible workspaces, with their
scalable, plug-and-play office setups, offer the ideal
solution.
Certain regions within APAC demonstrate particularly strong demand
for flex spaces, including major business hubs like Singapore,
Seoul, Shanghai, Tokyo, Dubai, and several cities in India, where a
mix of local and international businesses drives the market.
Furthermore, despite the hybrid working pattern, the culture of
physical presence in Asian offices is significantly higher than its
Western counterparts. With major companies increasingly requiring
employees to return to the office, these factors underscore that
the demand for flex spaces in APAC is more prominent than ever
before.
Recipe for success
TEC stands out as the leading premium flexible workspace operator
in APAC, distinguished by its strategic focus on high-end products
and services, prime locations in core CBD buildings, exceptional
occupancy rates, and sustained profitability.
TEC demonstrates a marked difference with its growth strategy
driven by pre-identified client demand, contrary to WeWork. In 2023
alone, TEC has added a total of 29 new Centres totaling 474,000 sq
ft of net area and over 7,200 workstations, due to MNCs' robust
demand for TEC's premium offerings. With close to 30 years of
expertise and a solid track record in the flexible workspace market
in Asia, TEC maintains an exceptional occupancy rate of around
90%.
TEC's success is built on a deep understanding of the needs of its
upscale clientele, with 83% being MNCs. It has also been a
profitable company for more than two decades with uninterrupted
positive year-on-year growth. TEC's focus on profitability is
evident in its operational efficiency and demand-led expansion
strategies. Unlike other players in the market who pursued growth
at the expense of profits, TEC has balanced its expansion with
financial sustainability, ensuring long-term success in the
competitive flexible workspace arena.
Conclusion
The APAC flex market presents a landscape with robust
opportunities, despite the cautionary tale of WeWork. The key to
success lies in understanding market dynamics, pursuing expansions
driven by client demand, focusing on profitability and business
sustainability, and maintaining financial prudence.
The flexible workspace industry shows significant long-term
potential, and operators with strong foothold in the sector, such
as The Executive Centre, will only grow stronger.
For more information about The Executive Centre, please visit
www.executivecentre.com
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