SEPTEMBER 2019

Off Market

The impact of Tech & Politics on Global Real Estate.

By ryan tucker
IMAGE WEWORK SAN FRANCISCO

Greetings!

This month I have the rare pleasure of sharing three Off Market Assets in San Francisco’s FiDi. Most exceptional of all? The offering of a 50K sf space in top notch, Class A building. These are the kind of opportunities that don’t come up often and don’t stick around for long.

This month’s edition of Off Market ​ however focuses not on choice assets in Tier 1 cities like San Francisco, but on the strategies that can be used to take advantage of opportunities that are hiding in plain sight around the world–opportunities to turn affordable real estate into high performing innovation hubs.

In today's update:

  • Warsaw: Beyond the Square Foot
  • Off Market Inventory
  • The Briefs: Trends, News and Big Deals

Have anything you want to say?
Email me directly at ryan.tucker@wework.com

 

MARKET UNDERSTANDING

Warsaw.

Moving Beyond the Price per Square Foot.

BMO inked a 15-year lease for the last 215,000 square feet of Conde Nast’s old space at 4 Times Square. (Real Deal)

Zynga​ finds a buyer for their San Francisco building, selling for $600M, but retaining a 150K SF footprint to keep their HQ. Zynga cites the market being at a high-point and the simple fact they aren't a Real Estate company as the primary drivers for selling.

JUUL Labs​ follows the Zynga playbook and acquires a 350K SF building of their own in San Francisco's Soma district.

Credit Karma, signed a new 106K SF Headquarters in Oakland, the second major move from SF to Oakland by a major tech company (Square recently signed a lease in the Uptown Station building). (SF Chronicle)

 

How Modi’s Victory Could Reshape India

Popular nationalist has opportunity to make nation a bigger player in global economy and Asia’s geopolitics, but could also bring changes to secular politics.

WeWorkWeWork Prepares For IPO With Chase Helping It Acquire A $2.75 Billion Credit Line

Following its submission to the Securities and Exchange Commission for its IPO, WeWork is now seeking for a $2.75 billion credit with help from JPMorgan Chase.

Global Impact Report

WeWork released their Global Impact report and the results are staggering. The WeWork economy supports $122.3 billion in GDP worldwide through direct, indirect, and induced spending – roughly the size of the economy of cities like Vancouver, Dublin, or Austin.

Forbes - Beyond Coworking: Homegrown Innovation Spaces Are Transforming Second Cities

Forbes writes about co-working's impact on second cities, spotlighting how WeWork has impacted and transformed cities.

IMAGE FROM WEWORK WARSAW

Warsaw: Beyond the Square Foot

That software is eating the world​ should be no new revelation, but many traditional multinational corporations have only recently caught onto the trend. From financial institutions​ to retail giants, new technology mandates are creating massive hiring needs with fairly tight budgets.

As a result, CFO’s are turning away from Tier 1 cities and entering lower cost markets in search of affordable real estate and talent.

Smart CFO’s aren’t just looking to save on cost per square foot; they need to save on talent… without sacrificing innovation.

Where to go?

The Case for Warsaw
Warsaw’s development of high-end software talent, coupled with supply shortages in Tier 1 EMEA markets and the compounding uncertainty of Brexit, make Warsaw an appealing option for companies seeking to invest in innovation labs and teams.

Companies, like Goldman Sachs, JPMorgan and Citigroup have all established a large presence​ there, and the Prime Minister is actively courting other financial institutions​ to leave London for Warsaw in the wake of Brexit.
The regulatory climate in Poland​ allows for a flexible workforce, from working hours to forms of employment. On top of that, vacancy rates remain high and terms are generally favorable to tenants.

To take advantage of these dynamics, understand why the tech sector is growing within Warsaw–hint, hint–quality talent, overall cost reduction and regulatory uncertainty.

Monthly rate and price per square foot are subpar measures of cost in markets like Warsaw because the true cost savings are in people–not just in salaries but in productivity.

The CFO has already saved over 40% in hard costs by moving out of the Tier 1 market, therefore successful real estate strategy focuses efforts on attracting top talent, improving productivity and building a strong culture.

In the case of regulatory uncertainty, speed to market is equally important; hence the need to move quickly in this market.

If you’re forward-thinking and willing to roll up your sleeves, you might explore capital efficient flex-up options over multiple phases.

My belief​ is that companies in uncertain markets, without a clear long-term horizon, should enter into agreements that lock in cost certainty, but offer the flexibility to shift gears with low sunk costs, if business priorities change.

BY RYAN TUCKER

AVERAGE TERM

3 to 5 years

 

Average length of term for leases in the

Warsaw Market.

FREE RENT

6-9 months

Number of months tenants in Warsaw typically receive at no cost.

T.I. ALLOWANCES ($/sf)

$21/sf


Minimal capital incentives are provided to new tenants, meaning businesses must front the capex.

VACANCY RATE

11%

Across all commercial buildings in Hong Kong, with 6% YoY change.

YOUR STRATEGY

Equals

A focus on secondary costs around Attract & Retain, Productivity and securing a top asset.

New Space

Off Market

Get ahead of growing trends with these off market assets…

SAN FRANCISCO

Virtual Tours

A new feature to explore some existing and pipeline assets.

What's the deal?

WeWork has three assets available in San Francisco’s highly sought financial district:

10K sf available in October

12K sf in January

50K sf space in Q2 of 2020 (two floor plates)

 

AROUND THE WORLD

Business Trends

What you need to know...

IMAGE FROM WEWORK WARSAW

News in Brief

What’s happening around the world…

​ DID YOU MISS IT?

WEWORK

THE BIG DEAL?

  • Wall Street Journal - Fintech Company Stripe Joins Silicon Valley Elite With $35 Billion Valuation​ Stripe Inc. climbed closer to the top ranks of the highest-priced U.S. startups after a new fundraising round valued the financial-technology company at $35 billion.
    “Airbnb, Inc. announced today that it expects to become a publicly-traded company during 2020.” 
  • CNBC.com - Cloudflare stock pops 20% in first day of trading​ Shares of Cloudflare closed up 20% in its first day of trading on the public market on Friday. The company opened trading at $18 after it priced its IPO at $15 a share on Thursday
  • Bloomberg - SmileDirectClub Sinks From IPO in a First Since ’08 Crisis​ SmileDirectClub Inc. shares sank 28% from their initial public offering price in Thursday’s debut, becoming the first U.S. firm since at least 2008 to raise more than $1 billion and price its IPO above range, yet sink in its opening trades.
  • FarmWise, a San Francisco-based business that builds autonomous farming robots, raised $14.5 million in Series A funding. With Trump disrupting the workers at home, and the trade wars with China, farmers and the heartland are feeling the pressure on both sides. More than ever, AgTech will be required to usher in the next frontier of food. Hopefully now we can finally have affordable food without sacrificing for health.
  • Automattic, which you know better as WordPress.com raised $300 million funding round at a $3 billion post-money valuation, from Salesforce Ventures.

About

How will India's election shape Global Opportunity? (WSJ)

  • Popular nationalist has opportunity to make nation a bigger player in global economy and Asia’s geopolitics, but could also bring changes to secular politics.

What is our value proposition globally?

  • Flexible space provider for corporate M&A.

How did we develop this account?

  • WW M&A team had a key relationship with Disney CFO that was instrumental in connecting us with their RE team in early 2018.

What do we have in progress?

  • $xxxK in TCV / 150 desk deal in NYC and xxx desk deal in Coral Gables.

What is the current footprint with us?

  • $xxxM in TCV and 100 desks in Shanghai.

How did we develop this account in China?

  • Ping-An is a Chinese insurance and financial services corporation.
  • BD in HK sat next to the CEO, at a social event. Afterwards, we invited the CEO to the WW table at The Economist' AI Breakfast and the account unlocked from there.

What do we have in progress?

  • This account has 13+ subsidiaries that we're individually developing with time.
  • WW China management team to meet with their senior executive team.
  • There is a $XX million TCV / XXXX desk deal in early stages of discussion.

What is the current footprint with us?

  • $XXX million in TCV / XXXX desks across US, UK, France, Japan, Netherlands, and Australia.

What is our value proposition globally?

  • Speed to operate, flexibility, and ability to drive end to end delivery in progress.

What do we have in progress?

  • High Growth Startup has expanded to 5 different countries with WeWork in 2019.
  • Currently partnering to find a new EMEA HQ in 2019.
  • Executive meeting scheduled this month to discuss broader partnership plans.

Ryan Tucker joined WeWork from the software space and is based in San Francisco. He helps high-growth organizations manage their Real Estate portfolio at a global level. Previously, he held leadership roles in several venture backed startups and cofounded Brandcast.

Off Market is a regular newsletter on the global trends shaping the real estate industry and future of work, but does not reflect the We Company.

Brandcast​ is a web publishing platform you should check out.