WeWork’s growing presence in several major cities prompts questions about its effect on neighborhoods. WeWork itself claims a 1.4 to 1.8x increase in economic activity once it enters a market. In this paper, we examine WeWork’s effect on the performance of nearby commercial properties. While the entry of WeWork does not generate any measurable monotonic trend break in rent and occupancy patterns once we control for other factors, there is evidence that WeWork prompts convergence in rent levels and rent growths. Variation in rent levels is reduced by anywhere from 8.9% to 48.2%, by some measures. Rent growths compress by a factor of four, from initial ranges of +/- 16% to +/- 4%, conforming more closely to what WeWork subject properties impose. It appears that WeWork’s presence has a constraining effect on the ability of landlords to vary rents: in effect, nearby properties had to more closely follow what WeWork set as a ‘neighborhood benchmark.’
… Interestingly, there does appear to be one measurable, intriguing result. Average rent levels of surrounding office buildings experienced a decrease in standard deviation
from the mean, with ranges tightening, following the signing of the respective WeWork leases13. Measures of variation for rent levels fell by anywhere from 8.9% to 48.2% after a WeWork location was established nearby. For properties that had relatively lower rent levels, this meant being able to raise rent levels by anywhere from 2% to 44% over the six-quarter period following the entry of WeWork. For properties that had relatively higher rent levels, it could mean a decline over the same time period (in the order of
5% to 10%). WeWork’s average rent level during the period they opened actually was on the higher end of the range relative to other comparable properties – but presumably, they justified such premiums because of the new format, the shorter lease, and all the other amenities that the WeWork experience claims to provide. …
from the mean, with ranges tightening, following the signing of the respective WeWork leases13. Measures of variation for rent levels fell by anywhere from 8.9% to 48.2% after a WeWork location was established nearby. For properties that had relatively lower rent levels, this meant being able to raise rent levels by anywhere from 2% to 44% over the six-quarter period following the entry of WeWork. For properties that had relatively higher rent levels, it could mean a decline over the same time period (in the order of
5% to 10%). WeWork’s average rent level during the period they opened actually was on the higher end of the range relative to other comparable properties – but presumably, they justified such premiums because of the new format, the shorter lease, and all the other amenities that the WeWork experience claims to provide. …
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