WeWork Israel targets disadvantaged locations

Benjy Singer / Photo: Shlomi Yosef , Globes

WeWork Israel general manager Benjy Singer is confident the company will overcome its upheaval and plans providing offices outside the main high-tech centers.

My meeting with WeWork Israel general manager Benjy Singer is in the latest branch launched by the shared workspace company on Shocken Street in Tel Aviv, its second branch in the immediate area. The first, on Hazerem Street, was one of WeWork Israel's first branches. The company now has 14 branches in Israel, half of them in Tel Aviv and the others in Jerusalem, Herzliya, Haifa, Beersheva, and soon in Ramat Gan and Petah Tikva.

WeWork's management, currently in the Midtown building on Begin Road, will soon move to the new branch on Shocken Street. After showing me around the building, Singer shows me the jewel in the crown - the roof overlooking the entire city, with seating areas. In addition to the impressive location, Singer explains, "It's important to us to be in south Tel Aviv, because that way we contribute to the development of the area. We have can deliver a message and cause change, and for me, this isn't just a slogan."

Rents in the area match the location. Rent for a workstation in the Shocken branch or the Hazerem branch are only half as much as rent for a workstation in one of the buildings in central Tel Aviv. The idea is to enable all sorts of employees to use WeWork's services.

In the near future, Singer plans to establish a presence in other disadvantaged districts because of his desire to kickstart change. "As we did in these buildings in south Tel Aviv, there are other areas on the country that we can develop, thereby helping the economy," he says. "WeWork is able to take a space and create a community around it. We can connect people who need something with people who want to give something. I really want to start something in the area around the bus station, which will help solve the problem of the migrants and the problem of youth at risk."

"Globes": How exactly will you do that? Will you employ them there?

Singer: "This is a catalyst for entrepreneurship and productivity. It's enough for me to set up 3,000 square meters, and an ecosystem forms around me. Within this, we can give space for free, for example. When you do good, it spreads. We also have to take care of the jobless, the immigrants, the haredim, and the Arabs. If we don't get all of them into the productivity culture in Israel, this won't happen. If I open a branch in East Jerusalem, companies will come and want to put their office there, and it can also help young people looking for meaning."

"No change in business activity"

Singer has been general manager of WeWork Israel since 2014. The interview with him is taking place at a time when the global company has been undergoing a well-publicized upheaval. WeWork planned a huge IPO, but the prospectus submitted by the company exposed heavy losses, a questionable business model, and dubious conduct by founder and former CEO Adam Neumann.

The IPO was postponed, and Softbank, WeWork's largest investors, injected cash into the company and took 80% of its shares at a company valuation of only $8 billion, compared with $47 billion before the IPO. Meanwhile, Neumann was forced to resign from the company, while receiving a controversial $1.7 billion bonus.

Have the events at the global company affected you?

"The global company has undergone a powerful earthquake, and the shock waves have also reached here. The main influence was that we had to downsize the development center in Israel and let talented employees go.

"In business activity, however, there has been no change. Our buildings are full, new customers are still signing long-term leases, and the employees are satisfied. We're adapting to the new situation, but at the same time, we're continuing what we do the best, and the situation on the ground hasn't changed."

"Who orders a taxi on the street, or holds a server?"

People often talk about businesses that are ahead of their time. Singer says, "Had WeWork been founded five years earlier or five years later, it would not have succeeded.

"When I began looking for properties, I knew that the first branch had to be in Tel Aviv. I imagined how it would look, but they invited me to see a property in Herzliya, and I went anyway."

The reluctant visit to the property introduced him to Ampa Real Estate CEO Zohar Levi, the owner of the building in Herzliya. "I told him, 'We'll reinvent the office. People don't work any longer like they used to, and the interaction between businesses is important.

"I sat opposite him, and I saw that he was enthusiastic. I gained confidence, because all I heard before that was, 'What is WeWork?' He suggested that we meet with Ampa group partner and Ampa Real Estate chairperson Tuli Ceder. I told Tuli the same story, and I saw that he was enthusiastic."

This introduction led to Ampa Real Estate's joining WeWork Israel's deals as a partner in a format in which Ampa Real Estate buys the buildings or rents them on long-term leases, and invests in them through to finishing. WeWork is responsible for finding customers and regular operations, and the two companies split the projects.

Actually, there is no difference between an ordinary real estate developer who buys or rents a building and leases it to Microsoft or Google, or to another company.

"There's a huge change that has happened in the world that is not connected to WeWork, and this has affected this thing called an office. When you leave here now, do you order a taxi by waving your hand? No. In the past, companies kept computer servers. Who keeps a server today? Players entered the field who were able to do it, and the companies rent their services.

"The same is true about offices. We made a real change. People don't consume this 'product' like it was once consumed. We can turn a space into an experience, into a community."

40% of the tenants are large companies

"In the past," Singer says, explaining the insight on which WeWork is based, "businesses sat in offices, and if the business changed - grew or became smaller - they had a problem. Today, businesses don't know what will happen to them, and they don't want to make a commitment. In general, commitment is not suitable for anyone. There are small businesses that want a solution for just six months.

"And another thing - the global trend today is globalization of cities, and therefore urbanization. WeWork says, 'If an employee's office was once 20 square meters, we can make one with five square meters. I believe that here, in this building, six times as many people will work as worked at Bank Leumi, which was here before."

What is the connection between people moving to the cities and how they work?

"In the past, throughout the business world, every person who was promoted got a bigger office. You see it a lot in law firms. In addition to offices being planned incorrectly, it's not appropriate for the way people work now. There was a lot of wasted space, but real estate prices rose, and that's less realistic. Today, the pendulum has swung in many aspects. Instead of employees standing in line at the employer for a job, employees work where they like working."

Here is where the latest trend enters the equation. WeWork not only offers a solution for small businesses and freelancers; it has also become a magnet for large companies preferring work in WeWork's offices to the exhausting process of finding offices suitable to their needs. There is also a risk that a business's size will change, thereby making the building it rented unsuitable. Large companies currently occupy 40% of WeWork Israel's space. WeWork Dubnov, for example, is completely occupied by Microsoft.

Explain why it is worthwhile for companies

"We have data on many types of businesses. We know the size of the offices that they need and what the companies' needs are."

But when you take a building, you do not know whether 20 small businesses or one large company will come there. The internal design is completely different for the two possibilities. It also varies according to the fields of business. Technology companies need one thing, while advertising may need something else.

"We see the trends in the market, and are familiar with each market. We don't always hit the bullseye. Sometimes changes have to be made, but we have a perspective that none of the large companies have.

"Look at the ToHa Tower (in which WeWork has a branch, H.M.). Bayside Land Corporation and Amot Investments, the most serious companies, are the owners, and they rented out a third of the building to us. They realize themselves that we're doing something else, they realize that WeWork's presence in an office building affects the entire building. All this is part of a bigger picture. I believe that eventually, almost all the office deals in the world will be done on the WeWork model.

"The employees of these companies - Microsoft, Google, Facebook - are spread all over the world. These companies have discovered that their employees are more satisfied when they feel that they're part of something bigger."

You mean that they are part of WeWork.

"Microsoft took the building on Dubnov because they felt the energy there. A Microsoft employee can take the WeWork community membership card and enter any of our offices anywhere in Israel and around the world.

"He feels that he is part of the community and the ecosystem. No other company in history has penetrated into huge companies as quickly as WeWork.

"Why did Softbank invest in the company? On the one hand, you have a model: I take a building from the owners and do something that is suitable for a very broad set of people. The large companies say, 'I don't want exclusive space; I want a space provider. I don't want to own space.' This is the basis of the shared economy - that people and companies don't want to be owners; they want to collect things."

"People need their own corner, even if it's small"

Despite all of the changes in the labor market that Singer is talking about, he admits that employees still need their own personal corner at work. Companies that tried to streamline and use less space by using hot spot technologies, in which each employee arrives and announces his arrival on an app, which offers him or her places available at that time, have given up the idea. "It's suitable for companies whose employees move around," Singer says, "but a person who goes to work every day needs his or her corner, even if it's small."

Most of the employees, with their needs, about whom Singer is talking are naturally millennials. When I remind him that not all the employees in the economy are millennials, he says that they account for 70% of the labor force, and describes them: "People think that they don't stay in one place - that they jump from one job to the next, because they have no patience, but the reason is that they're searching for meaning. Their workplace has to be very dynamic, a place in which they can grow. If they see that they have no horizon at work, they leave."

Singer says that the current average occupancy rate at WeWork Israel's branches is 87%, while the break-even point is 50-60% occupancy.

Aren't you in too much of a hurry to set up more branches?

"We really feel the market. We're growing not just because we believe in Israel, but also because we believe that the companies will continue growing."

Which of your branches is the most successful?

"You can measure success in several ways. If you see Jewish and Arab entrepreneurs working together, that's something very strong. What am I trying to say? The building in Beersheva, for example, isn't the most profitable that we've got, but it has become a home for people. There was never anything like that before.

"So you can say that WeWork's Tel Aviv branches are the most successful. They’re probably the biggest, but all of the buildings are profitable."

Published by Globes, Israel business news - en.globes.co.il - on December 24, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Benjy Singer / Photo: Shlomi Yosef , Globes
Benjy Singer / Photo: Shlomi Yosef , Globes
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