This is a growing category. Not a market share grab. I don’t see...

This is a growing category. Not a market share grab.

I don’t see WeWork is a direct competitor to SRV at the moment. I see them both, along with Regis and others, competing against the high-capex-cost of businesses that traditionally have their own dedicated office space.

SRV was very early in identifying that it’s cheaper to pay a little more per office seat/desk, that it is to rent out an office to grow into (= lots of empty seats/desks). This also moves a fixed cost and sunk cost into a variable cost with no/low wastage.

This space will grow, significantly, and quickly.

In Australia companies usually need to have a 6 month bond to secure office space. Then add into this the cost of fit-out and make-good when you leave. Then all the utilities + office equipment and their various SaaS models, etc = unnecessary and totally avoidable overhead. More importantly 90%+ of the time, office space is not optimally used as most businesses rent for the future size of their business.

WeWork is sexy. It is targeting start-ups, a category of business that most existing office spaces don’t really want as they are high risk, difficult for many to get bank financing to underwrite their 6 month security bond, and there is legitimate concern that many may not be around to pay the rent for the full 5yr term of their contract and the cost of the make-good (hence the 6 month bond).

SRV goes after a slightly less ‘start-up’ market than WeWork. Also a segment that will grow significantly as the traditional view of non-traditional office commitment changes. And as accountants better understand the value and opportunity of moving a fixed costs to a variable cost.

This is a growing category. Not a market share grab.