WeWork has begun approaching occupiers directly for its scheme at London’s Southbank, causing agents to ponder how much further the company will disrupt their way of working.
The co-working giant agreed to lease up to 50,000 sq ft to Centaur Media at Almacantar’s Two Southbank Place, SE1. It is understood that it approached Centaur directly in New York, where the publishing group has an office, and neither side turned to an agent for advice.
Previously, Centaur typically had worked with London property agent Edward Charles & Partners for advice.
Centaur is currently based at 79 Wells Street, W1T and it is understood that its office lease expires in February 2020.
Meanwhile, WeWork had appointed Cushman & Wakefield exclusively in March to fill its 280,000 sq ft location at Two Southbank Place.
Centaur chief executive, Andrea Vidler, said: “These new premises offer a very cost effective solution for our need for efficient, connected and well located premises. The lease agreement provides us with unique flexibility in terms of size and space and length of tenancy, both of which are critical considerations as we transform Centaur into a more focused business.”
A WeWork spokesperson added: “We have relationships with agents in most of our global markets, and we value those relationships greatly. As WeWork expands, we will continue to partner closely with agents.”
Two Southbank Place, the largest global co-working scheme in the world, is expected to be operational in August 2019.
WeWork, which is valued at $20bn (£15.6bn), agreed to lease the building last year.
Earlier this month it also leased a near-100,000 sq ft from Kennedy Wilson in Southbank at Friars Bridge Court, SE1.
A new dawn?
WeWork has traditionally dealt directly with SMEs but it is the fact it is increasingly approaching bigger companies itself that is of greater concern to London agents.
One West End specialist commented: “It’s the new dawn; WeWork can market themselves internally. Centaur had offices in New York and they did a good job of making sure they covered off all their requirements.”
Another City leasing agent added: “It is just the start really. They’re all over the corporates, as they need to let [Two Southbank Place] up.”
Shell is understood to have circled Two Southbank Place and the building has the potential to become a hub for some of the world’s biggest companies to sit together rather than a place for burgeoning start-ups.
Despite WeWork increasingly targeting occupiers directly, it continues to offer cash incentives for agents it does choose to work with.
This dates back to a programme put in place in 2016, which is still current, whereby agents get paid 10% of the membership fee for the first 12 months up front, followed by 2% of the membership fee for up to 36 months. Agents also get a commission fee when a client expands.
As WeWork ramps up its co-working strategy in London, fuelled by an additional $3bn in Softbank funding, UK landlords and agents are racing to catch up. Most recently, Land Securities announced it will be launching a new flexible office product in the New Year.
The sector is likely to expand further as demand for flexible workspace is set to accelerate.
According to Knight Frank research, more than two-thirds of global corporates plan to increase their use of flexible co-working and collaborative space over the next three years.
Dan Gaunt, head of City leasing at Knight Frank, said: “The growth of the co-working sector relates to the fact that a lot more corporates are now considering both traditional and more flexible solutions, and in some cases, both in the same building. WeWork and other providers are well positioned to secure this demand. This shifting occupier trend is a testament to what they have created.”
However, agents are divided as to how far WeWork will disrupt the London market, especially as others take a defensive position with new flexible office brands.
One City agency head commented: “WeWork is looking to displace agents and get direct relationships with occupiers. Once they get mandates for space, they can build on that, whether locally or globally. They now have more conventional and bigger occupiers as well to target.”
In a sign of what might be yet to come in London, earlier this year the company announced a move into brokerage in the US. WeWork Space Services aims to provide leasing advice to small-and medium-sized tenants. It is currently at pilot stage.
Another London-based agent argued WeWork would always need to rely on agents in specific cases. “Initially I understand they hadn’t planned to use agents for any of their buildings. I would say they still need agents. For occupiers, doing deals direct can also be a dangerous game and a false economy.”
WeWork has a delicate balancing act to play with both agents and landlords. While traditional agents still hold useful relationships and are important to keep on side, they are not always necessary to secure and pay to do big deals with corporates. Similarly, landlords need to be kept on side in order for it to be possible to occupy their buildings, but increasingly the company is coming into competition as the likes of British Land and LandSec build their own models. How the dynamics between WeWork and those groups evolves will be crucial to shaping the future of the London office market for years to come.
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