WeWork has struck one of its biggest European deals, with HSBC agreeing to lease more than a thousand desks in London at what the shared office provider says will be the world’s largest co-working space.
The UK bank is to take 1,135 desks on a multiyear agreement at the US group’s Two Southbank Place development in Waterloo, WeWork said.
The deal makes HSBC — which also occupies WeWork space in Hong Kong and elsewhere — one of the shared office provider’s largest tenants globally.
Agents said the agreement was the latest sign of WeWork competing with traditional landlords as it seeks to attract large teams from big corporations alongside start-ups and small firms.
HSBC declined to comment on what areas of the bank’s business the staff were from or whether it would affect the lender’s own real estate footprint in London.
“Corporates don’t want to hold long, expensive leases if they can find alternative ways to procure elements of their footprint. The benefit of something like WeWork is they have the volume and the bulk to do significant deals,” said Chris Lewis, a director at Devono Cresa, which advises office tenants.
“If you converted it to a conventional requirement, the capital expenditure alone on a deal of that size would be quite significant.”
WeWork, which has grown rapidly to more than 400 locations worldwide, says four in 10 of its members are now from bigger companies. Mr Lewis said companies seeking between 50 and 200 desks in London were routinely considering both flexible and conventional space. But deals for several hundred desks with serviced office providers are still comparatively rare.
Facebook has leased entire buildings from WeWork in Mountain View, California, and in London, while in Boston a catering group, ezCater, has leased 100,000 square feet — enough for up to 750 employees.
WeWork itself, along with rivals such as IWG, Knotel, Convene and The Office Group, takes long leases on buildings which it then refurbishes and lets to tenants on all-inclusive contracts for much shorter periods than traditional landlords. It has also begun buying buildings, but these remain a small part of its portfolio.
WeWork earlier this year raised $1bn in fresh capital at a $47bn post-money valuation from Japan’s SoftBank. It is working towards a public listing and has emphasised the growth of its corporate customer base as it seeks to show its business model is sustainable.
Standard & Poor’s, the rating agency, earlier this year noted a “duration mismatch between the long-term leases and the monthly member contracts” for WeWork and its rivals, noting that “the natural instability of the independent workforce presents a significant risk to the company’s profitability between individual members or small businesses, whose viability can be sensitive to economic swings”.
A study last year by Cushman & Wakefield found that investors applied discounts when buying buildings with high WeWork occupancy rates.
Two Southbank Place, with capacity for more than 6,000 desks, is due to open in phases in July and October, and is leased from the London property developer Almacantar, which has put the building up for sale — along with a neighbouring office leased to Shell — for £875m.
HSBC’s global headquarters is at 8 Canada Square in Canary Wharf, a skyscraper owned by the Qatar Investment Authority. But it also has staff elsewhere in London, including its private bank in Mayfair and digital staff in the Bluefin Building south of the Thames, along with its ringfenced UK bank based in Birmingham.
Additional reporting by Stephen Morris