WeWork offers brokers deal to poach tenants from rivals

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This article was published 27/08/2018 (2593 days ago), so information in it may no longer be current.

Last September, WeWork made a show of trying to poach customers from rival co-working companies during the slower months of late summer and early fall. Employees of the co-working giant cold-called competitors’ tenants, set up games and couches outside of other shared-office spaces, and offered up to a year’s free rent if they switched over.

This year, WeWork is enlisting another party in the battle: brokers. The company is offering commercial real estate brokers worldwide a 100 per cent commission on the first year of rent paid by any tenant who switches to WeWork from a top competitor and signs a lease by Oct. 1. Tenants also get half off the first year’s rent if they sign for at least 12 months. That means, accounting for the discount, that WeWork’s current bonus to brokers is five times the standard commission it typically offers of 10 per cent on the first year’s rent.

Competitors say that generous bonus is behind a new wave of brokers cold-calling their tenants and trying to tempt them away, offering them half off a year’s rent if they switch to WeWork.

“A year ago WeWork had some of their staff coming to our locations unannounced, posing as prospective customers, taking a tour, walking around, taking pictures of logos of companies they saw, then emailing and calling them directly and offering them discounts,” said Amol Sarva, chief executive officer of Knotel Inc., a WeWork competitor that offers businesses flexible work spaces similar to co-working services.

“Now they’ve hired an on-demand plausible-deniability army to do the dirty work.”

WeWork declined to specify which rivals a broker would have to lure a tenant from in order to receive the promotion, but in the U.S. the list includes Knotel, IWG Plc and Industrious, according to people familiar with the deal, who asked not to be identified because the details are not public. Late summer is a slower time for WeWork’s co-working business, the company said, which is why it does seasonal promotions around now.

Part of the reason WeWork can afford such large promotions is that it has raised billions in funding, including US$4.4 billion from SoftBank Group Corp. last year. Using venture capital funds to kneecap competitors is a common strategy in Silicon Valley, and real estate providers often lure tenants and brokers with discounts and bonuses. But the new program suggests WeWork is strengthening its relationship with brokers and also raises questions about its ability to keep its buildings full as it continues to expand at eye-watering speed.

— Bloomberg News