WeWork Spectrum Center buzzed with energy. The space, brightly lit and colorful—modeled after Wes Anderson’s film “The Grand Budapest Hotel”—represents the epitome of flexible, noncommittal office concepts where laptops move freely from communal tables to individual workstations or private offices, and collaborations can happen over a conversation at the coffee station.
Jon Slavet, WeWork managing director of the western U.S. and Canada, said Orange County, offers an interesting mix of tenants—including real estate, software development, marketing and consulting—compared to Bay Area’s “extreme, classic startup tech.”
He added that there’s already a waiting list for WeWork space since opening the Spectrum location in 2016. The company’s planning a second location at 3200 Park Center Drive near South Coast Plaza. The site, scheduled for completion in the spring, is nearly 40,000 square feet and can accommodate 700 members.
Value Proposition
WeWork’s spaces are not cheap per square foot. WeWork Spectrum charges $390 a month for a hot desk, $500 a month for a dedicated desk, and $660-plus per person, per office. Members can save hundreds per month with shared services, such as security, reception, broadband, printing and perks on par with larger tech companies—Slavet estimated companies can save up to 20% per year. But the real perk is having other people around.
Tenants can network with other WeWorkers in their building over coffee-and-snack hours and other events where they might find a software developer or other service providers. More importantly, WeWorkers can tap into WeWork’s approximately 175,000 members spanning 275 locations in 29 countries.
“More than 70% of our members do some kind of businesses with each other on a building level, city level and global level,” Slavet said.
It can be hard for startups to lease directly from OC’s largest landlord, Newport Beach-based Irvine Co., due to a limited amount of available area space for smaller tenants. The smallest amount of office space available at the landlord’s 100 Spectrum Center building, for example, starts at 1,102 square feet, with monthly rents topping $3.20 per square foot, according to the company’s website.
At the under-construction Quad at Discovery Business Center, the smallest available space is nearly 6,000 square feet. Prices per square foot are undisclosed but are likely to top $3.50 based on current market rates.
The real estate developer, however, has put together another solution for startups through its ReadyNow suites, which it offers at a variety of area locations. It split larger office suites into smaller spaces featuring open-space plans, flexible layout, and other design elements meant to maximize communication and collaboration.
There are about 150 to 180 companies at WeWork Spectrum, including Finland-based computer software company Vincit and Jollibee Foods Corp., the Philippines’ largest food service company, which has made the location its western U.S. headquarters.
Slavet said that connectivity has made WeWork attractive, not only to small and midsize companies, but also large enterprise companies.
“Many of the Fortune 500 companies are part of our network. We are about one-third Fortune 500, and two-thirds midsize [companies] and startups,” he said, adding that a year ago the percentage of large enterprise companies was in the single digits.
Southern California
WeWork has about 50 locations in the western U.S. and Canada, according to Slavet. He said the company’s focused on growing the southwest business over the next 18 months. The region consists of Los Angeles, OC and San Diego.
He declined to comment on additional OC sites but said new locations must have the following criteria: easy access to highways or roads, and ample parking and proximity to malls, like Spectrum Center or South Coast Plaza, which provide access to restaurants, coffee shops and bars.
WeWork’s Startup
New York-based WeWork Cos. was founded in 2010 by former Israeli naval officer Adam Neumann and serial entrepreneur Miguel McKelvey in Manhattan’s trendy downtown neighborhood of SoHo.
In August Japanese multinational telecommunications company SoftBank Group Corp. invested $4.4 billion in WeWork. SoftBank invested $3 billion into WeWork directly and $1.4 billion into three subsidiaries, WeWork China, WeWork Japan and WeWork Pacific.
The Wall Street Journal reported that $1.3 billion of Softbank’s investment bought out existing WeWork shareholders.
The summertime investment by the Tokyo-based telcom and venture-capital arm Vision Fund values privately held WeWork in a $20 billion neighborhood—according to Dow Jones VentureSource-the Wall Street Journal, Bloomberg, Forbes, and others—based on the filing from the SoftBank investment and others using real-estate valuations based on square footage leased in a respective market, etc.
OC is a microcosm of WeWork’s wide expansion: organic with ventures such as WeLive, a co-living business; acquisitions, including the Flatiron School, an online coding academy on undisclosed terms, and a reported $200 million for online social-matchmaker Meetup; and $850 million to move its own offices uptown to the former Lord & Taylor building on Fifth Avenue.
The co-working king hasn’t let up on its core business. Industry tracker Commercial Observer says WeWork is now the largest leaser of office space in the U.S., 3 million square feet in Manhattan alone. Last summer Neumann told guests of the New York Economic Club that his shared-space provider would hit $1 billion in revenue in 2017. He also said the company will go public but gave no further details.
