How WeWork stands to benefit from return-to-office mandates

While there is an increased push to get workers back into the office, there is an even higher demand to create space in the office for them, according to WeWork Chief Revenue Officer Ben Samuels. Samuels tells Yahoo Finance Live how WeWork is leveraging its portfolio of locations in order to capitalize on the return-to-office trend.

Video Transcript

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- Well, we've heard repeatedly about the commercial real estate market being under strain from waning demand for office space, largely because of the move to hybrid and remote work. But our next guest says, that's not exactly the case. Here to dissect the emerging trends shifting the commercial real estate landscape is WeWork chief revenue officer, Ben Samuels. Ben, good to have you on today.

It's interesting to hear WeWork's perspective on what has been playing out. Because we've heard from some of the large real estate companies that have said, look, we're just not getting these office spaces rented out. You say a lot of those companies are coming to you.

BEN SAMUELS: Firstly, thanks for having me. It's great to be here. We've really seen an incredible trend on the return-to-office. I sit in London, and I've had the good global perspective for a few years now. Post-COVID in international, we saw people come back to the office straight away. As soon as lockdown and restrictions were lifted, people started coming back. And our footfall and our traffic and the return-to-office was really robust.

I think the US was a bit more of a mixed message. I think that the return-to-office wasn't quite as clear, and it was a bit of a slow burn. But now, we've really turned a corner. I think it started in Q4, with some of the more traditional occupiers, banks, financial services. Their CEOs came out and said, we need people back.

But it really wasn't until the end of Q1, early Q2, where we saw the tech companies, and even leading AI companies, saying, we need to be in the office. We're better together in the office. And I think that's driven some of the urgency that we've seen. So there's been a real scramble for space in many of our markets.

- And has that started to level off at all? Because when you take a look at a lot of the data, we've been hovering around 50% now for the last quarter or so. So, I guess, where do you see that growth then coming from in the future?

BEN SAMUELS: Well, I think, as I said, you saw that the first wave really hit, I'd say, the end of last year, early this year. But it was only a handful of occupiers who were really mandating that return-to-office, and very prescriptive to return-to-office three or four days a week, perhaps. But I think it's only recently where we've seen the tech companies turn that corner.

And I think they've been very prescriptive of what their expectations are. It's been controversial, but I think they're heading clearly in one direction. So I think while you did see that initial wave kind of plateau, I think when we look forward to end of Q2, Q3, you're going to see a step up in that.

I know, certainly from our perspective, the large companies that are coming to [AUDIO OUT] we not only need a lot of space, we actually need it for return-to-office immediately. Some of them are taking space in May for a June move-in, but certainly as they look post the 4th of July, Labor Day, the expectation is a lot of people will be back in the office.

And I think it's fascinating, if you look at the employee base of some of the largest tech companies, the headlines have captured everyone's imagination about layoffs. But in reality, they have way more employees today than they did pre-covid.

So you're in a situation where you have many employees who are working remotely, they've also spent time getting rid of office space, downsizing. Now you have a real scramble for space where you have more employees, less office space, and you want to create that good experience at the office. You need more space and you need it now.

In fact, we were on a call with one of the heads of real estate from a leading tech company who said, in Europe, in particular, they're having some people have to sit on the floor. So that's not going to be a very good return-to-office policy if people are sitting on the floor. So I think there's a real need for space, and a need for space urgently.

- Yeah, and that speaks to the sheer scale of the ramp up that we saw, especially within tech during the pandemic. I wonder if you can take me inside some of these conversations you're having with these big companies because I'd imagine, on the one hand, publicly, they're saying, well, we want employees to come back to the office. And yet behind the scenes, they've got to be thinking about what the future of the office looks like. They're going to WeWork because they want more flexible terms.

BEN SAMUELS: Absolutely. I think it speaks to our value prop, where you're going to be able to get 10, 20, or 50,000 square feet with turnkey solution. So that's fully-fitted, ready to move into on Monday. There just aren't a lot of places.

So as you're doing your trial and error, as you're working through what the return-to-office looks like for you, flexibility is really critical. I think, when you thread the needle on commercial-- on traditional real estate on a 10-year lease, you need to be very, very clear about your head count, your utilization, and your term.

But what we offer as space as a service on flexible terms means you can start, see how it goes. You can take more space, you can take less space in the future, if you need it. You can also port that space from one city to another city. So we've really tried to create liquidity in what has traditionally been a very illiquid space.

You could hire a team in Seattle and say, you know what, they really need to be in Austin. And with us, we let you to make those pivots. So it's really leveraging our portfolio of 800 locations globally to work on your RTO, to trial and error, and partner with us, hopefully, to get it right.

And there won't be one model that will be successful going forward. Every company is going to have something slightly different. We think we've evolved, post-covid, into offering multiple solutions. So of course, as the traditional space as a service, are office and flexible terms. But then there's the All Access product for those who are going to continue to work remotely or flexibly and need to tap into an office space or a conference room on demand.

And then there's our workplace, WeWork workplace, which we rolled out. It's sort of our super app and platform to manage that return-to-office. Nothing is worse than showing up at the office and then realizing the rest of your team wasn't there and you're on video calls all day long.

So it's not only about collaboration in the office, but intentional collaboration. When you come in, it has to be meaningful. So I think marrying those three legs of the stool together is really helping us partner with some of the largest occupiers and figuring out what the RTO looks like.

- And then we're in the office five days a week. And I got to say, I was a little hesitant at first but there are a lot of pros to being in the office here. But when it comes to the investor side of the story, there's been a lot of focus on WeWork on the cash burn rates. What does that look like? Has that stabilized?

BEN SAMUELS: Well, I think if you go back to Q1 and what we announced, we announced a couple of things. Number one, our debt restructuring, which we're really proud of. I think it's pushed that debt wall, if you will, out several years. Giving us plenty of runway to execute on the plan.

I think we were very clear on Q1 and through that debt restructuring what the plan is, what our milestones will be, what our goals are. And this team here has never been more focused on delivering on that. So we feel comfortable that we have plenty of runway, we've raised more cash, we've converted some debt to equity, and given ourselves a lot of headroom to deliver in what we think is really our market.

And we think now is the perfect market for a company like WeWork, given our scale, given our size, and given that the market is really moving our way. I think it's not only a short-term scramble for space, with WeWork, I think there's a structural shift going on, and we're very well-positioned for it.

- Well, Ben Samuels, we hope to have you back on the show again soon. WeWork chief revenue officer joining us from London today.

BEN SAMUELS: Right, thank you.