WeWork And The Coworking Spaces of the Future
Transforming empty commercial spaces into places for teams with a need to store their hardware and other infrastructure may alleviate the pains of bankrupt co-working spaces.
It is no secret that there is an ongoing commercial real estate crisis. Stalwart cities such as San Francisco and New York have been struggling to return employees to the office, forcing the sale of grand workplaces at a price severely below their valuations. Last week, WeWork announced it would be filing for chapter 11 bankruptcy (video courtesy of Bloomberg). A far cry for the once-deemed genius idea of leasing office space to burgeoning startups while the real estate spaces appreciate, or so they thought. Due to lackluster management (the shortcomings of former founder Adam Neumann are well documented & another great video from Bloomberg) and a lackadaisical plan to serve the needs of its tenants, WeWork has to give up their ingenious reputation and bring in others to clean up their mess.
Had WeWork’s executives been diligent in keeping up with the trends of their customers: emerging startups in artificial intelligence, hardware, or other compute demanding parallels, they could have engineered ways to cover their losses.
A proposal for the future of co-working spaces would be to allow teams to store their infrastructure on-site, such as hosting their GPUs & server racks at one of these secure locations. This small change to host infrastructure on-premise, would be advantageous for both the investors and founders, as they each aim to serve their customers.
For founders, the cost of compute can be difficult to calculate prior to launching services. Additionally, the scarcity of GPUs available to startups due to global manufacturing and supply chain demands has caused the price of compute to skyrocket and outsourcing to other providers has not become cheaper.
Many of these startups have realized the ridiculousness of cloud computing cost structures and instead choose to invest in their own in-house servers to reduce costs in the long-term. a16z released a series earlier on YouTube earlier this year explaining the demands of compute costs for reliant startups and the benefits of those ventures owning hardware here. This strategy is an advantage if the startup were to fail or change plans. Being able to sell their infrastructure for parts could ease the damage of closing shop or migrating to new systems.
For the creditors of commercial co-working spaces, serving these types of founders and ventures could maintain prosperous long-term relationships among the parties. Should these spaces be remodeled or adjusted to include room for infrastructure requirements, teams could continue to fill the spaces and potentially ride out the effects of the work-from-home and return to office adjustment.
We are not going to see co-working spaces become obsolete. Many founders are bullish that they can land big returns from compute demanding startups in compute demanding fields. A synthesis of startups scrapping together the funds to own their computing assets, being met by these investors with the spaces to let them store their belongings, will allow them to harness their creativity and innovation. Hopefully, commercial real estate can bounce back and outlast the storm of a period of high stakes economic decisions.
Great insight!