Much
has been written recently about the upcoming initial public offering by WeWork. But less has been written about the
company’s impact on the cities in which its co-working facilities are located.
WeWork
claims to have a positive impact on not only the companies leasing space from
it, but also surrounding businesses. So Moody’s
Analytics REIS Chief Economist Victor Calanog and Economic Analyst Keegan
Kelly set out to explore whether this promised benefit is really happening. The
two recently released a case study
using New York City as its subject. Here’s what they found:
- While rents and occupancies might have changed
in four nearby office buildings studied, there was no discernible effect that
could be attributed to WeWork’s entry into the area. - Of four nearby apartment buildings studied, there
was no relationship found between rent levels or vacancy rates as a result of
WeWork. - There was one measurable 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 leases.” This means that WeWork causes rent levels to
converge by setting a rent level that surrounding office building managers feel
compelled to follow.
The
authors concluded that the bottom-line effect of WeWork was ambiguous, summing
up the effects as follows: “Despite claims of raising economic activity and
business vitality in places where WeWork enters, it was never reasonable to
believe that WeWork’s presence would be a tide that lifts all boats, with
unambiguously positive effects. The more appropriate analogy is that WeWork is
like a pebble cast into a pond, disturbing and changing the ecosystem.”