Music is streaming through Bose speakers installed in the restrooms. It’s early afternoon, but a crowd is milling around a tap that dispenses draught beer. Others are returning to their desks after a swim in the rooftop pool. But this is a workplace. A co-working space, to be exact. The WeWork office on Residency Road, Bengaluru.
SoftBank-funded WeWork is expected to become the third most valuable startup in the US, after Uber and Airbnb. Currently valued as a tech company at $20 billion, this valuation is soon expected to double after another infusion of capital from SoftBank.
With all the swank and frills, WeWork has a lot of happy campers. Ordinarily, this sort of environment is more commonly associated with startups. Indeed, globally, these account for the vast majority of WeWork’s inhabitants with corporates only accounting for around 30% of the company’s occupancy. In India, however, the situation is different. Right from its inception in India, corporates have made up at least 50% of WeWork’s occupants. “The place is filled with corporate drones,” laments the founder of a startup based out of a WeWork in Bengaluru.
This trend is no accident.
With its real roots deeply embedded in real estate, WeWork India is owned and operated by real estate company Embassy Group. The Bengaluru-based real estate group’s job is to acquire prime property, furnish it, and run the co-working operations across major Indian cities. WeWork Inc makes sure Embassy sticks to WeWork’s global design principles and standards. WeWork takes a cut of around 15% of its India’s revenues.
By the end of this year, the 25-year-old Embassy Group is expected to have invested close to Rs 150 crore ($20 million) as it scales WeWork India from the current 10 centres to 20 across Bengaluru, Mumbai and Delhi. The Ken learnt that at the end of three years, WeWork will buy out the co-working operations from Embassy.
However, for Embassy to be able to get a 10-20X return on its investment, it needs to have a near 100% occupancy, said a senior official at WeWork India. “Higher the occupancy, higher the valuation. So right now, WeWork India only cares about occupancy and not so much even revenue,” said the executive.
With this in mind, WeWork India has actively wooed large corporates in the hopes of driving occupancy rates up. Large corporates are also considered safer occupants, a hedge against the vagaries of business, which claim startups first. Since revenue isn’t the focus, WeWork has pitched its services to corporates at heavily discounted rates—anywhere from 20% to 40% based on the negotiating prowess of companies. At these rentals, the company will take around three years to just break even, said the WeWork official.