A Dive Into Coworking Acquisition Strategies
The coworking industry has been making waves in the past couple of years. Not only has the industry as a whole expanded as more and more US workers gravitate towards this non-traditional form of working, but companies like WeWork and Industrious have branched out beyond just providing a workspace for people. What’s behind e WeWork’s acquisition strategy and other large coworking chains like it? Here are a few answers from what we can gather:
Coworking giant WeWork has acquired some interesting companies in the past year. One possible coworking space business model it might be utilizing is vertical integration. Coworking has gained in popularity because it blends work with a certain type of lifestyle that encourages being fun, outgoing, and proactive. Through vertical integration (supplying more than one service), WeWork and other actively expanding chains aim to further blur the lines between work and life and extend their brands throughout the average person’s day. Coworking companies are moving towards providing every aspect of living to retain customers, compete more aggressively in the industry, and spread their brands.
The epitome of vertical integration is to take care of every single need the customer has. Generally speaking, coworking spaces have low profit margins per customer. However, the ideal coworking space financial model can achieve more transactions per customer with the right partnerships and acquisitions. For example, WeWork has expanded into services like housing, fitness, and even elementary schools to fit more of their member’s needs.
According to the Global Coworking Survey, just 40% of coworking spaces are profitable. However, the survey did show that 72% of all coworking spaces become profitable after two years in business. Because the industry is fairly new, many of these coworking spaces are still in the beginning stages of operation.
It can be a strong coworking space financial model for large chains to acquire smaller coworking companies that are profitable. Take Industrious, a coworking firm, which recently acquired TechSpace, an office-space provider for tech-related companies. By buying this smaller company, Industrious added seven new profitable locations to its portfolio. Industrious also acquired a Chicago-based coworking company in 2018, which doubled the coworking firm’s portfolio.
Consolidation might be WeWork’s acquisition strategy as well. Even though it lost $1.9 billion last year, it was able to make $1.8 billion in revenue. In 2017, they had just 186,000 members, but the coworking giant now has more than 400,000. The rapid acquisition and consolidation of coworking spaces have helped WeWork continue to drive the business.
Building a Lifestyle Brand
Coworking has clearly become more than just a place to work. These spaces aim to fill needs outside of the workplace and provide a sense of community as well as offering niche services. One example of a coworking company that is building a lifestyle brand is The Wing, an all-female New York social club/coworking chain. The company has built a brand that aims to empower women in all phases of life.
Though it hasn’t been officially admitted, building a lifestyle brand could be the motivation behind WeWork’s acquisition of Meetup, a website that links up people with similar interests and inspires them to meet in real life. WeWork has always focused on building a community through mixers, community gatherings, and other networking events that help its members socialize. However, through the acquisition of Meetup and other companies that are not directly related to coworking, it is becoming more evident that WeWork wants to establish itself as a lifestyle brand.
Regardless of the motivation behind the acquisitions of coworking spaces, it is clear that the industry is rapidly changing. As coworking spaces aim to fit the growing demands of their members, more services and companies will be added to expand the community even further.