WeWork CEO Sandeep Mathrani joins Yahoo Finance Live to discuss debt restructuring plans, all access memberships, occupancy, job cuts across the tech industry, and the post-pandemic outlook for the company.
Sandeep, thank you for being here. So you recently did this big restructuring. Where does that position you now going into the next year, two years, five years?
So we have now the runway we need to grow our business and go on the offense versus being on the defense. Our business is, you know, all about flexibility on cost, time, and space, and in this postpandemic world, all topside we occupy are small businesses, medium businesses, and enterprises-- are seeking, you know, a solution that's complete, that's holistic, that doesn't require any capital investment. So it almost feels as if this is-- this moment was created for WeWork as a provider of space.
So I think we set up ourselves very well on a balance-sheet perspective to get on the offense.
Occupancy grew, as well, about 17%. And so, effectively, we continue to see revenue growth at a time where-- we're actually taking-- we're actually taking demand from traditional occupiers, right? So we control 1% of the market in New York City. And we took 18% of the demand.
In London, we control 1 and 1/2%. We took 35% of the demand. What that is saying to you is that the occupiers are leaning towards flex space. And so, to answer your question, Brian, on expenses, you know, we've been very diligent over the last three years since I've been CEO to take out expenses, whether it be rightsizing the organization, streamlining-- excuse me-- streamlining the real-estate portfolio, and making sure we're a well-oiled machine.
We continue to streamline the company. I would say that, you know, it's a process that never actually ends. And it should never end. You should get more efficient over time. But I would say the bulk of the work has been accomplished. For example, we took SG&A, you know, which we've talked about being, you know, almost $800 million at the end of last year.
It's going to be in the low $600s this year, so we are taking cost out there. We streamlined our real-estate portfolio, and we continue to do that. The beauty of where we sit is we're a tenant. And when assets become obsolete, there's an oversupply in the market, we're able to adjust the supply-and-demand characteristics.
We don't own the buildings, so we're not handicapped by mortgages. We're not handicapped by lenders, you know, putting restraints on providing rent concessions and tenant allowances. We provide a turnkey solution. So occupiers are seeking certainty in this moment in time, and we're able to provide that certainty to them on an immediate basis.
BRAD SMITH: Does the WeWork model right now-- and especially in the profitability benchmarks that it set for itself, does that bake in another kind of drastic shift, if there were to be one, on the definition of what the work place is, given that the pandemic turned that on its head, essentially?
SANDEEP MATHRANI: Well, you know, in many ways, it's exactly-- it's exactly where we are, right? So the-- in an environment where people want to come in, they want to come in for a purpose. They want to come in for collaboration. They want to be able to take space that's required.
They want to be able to, you know, have a cost per head that's more reasonable. Look, prepandemic, human resource departments could predict 10 years out what the growth of a company would be, and CFOs were OK with taking on real estate to accommodate growth for 10 years. Today, that's an unknown.
And so we provide that perfect solution, where you provide 12-to-24-month's commitment, and you can grow with us. I'll give you an example of a company called Procore. Procore was a company that's a software company that does, you know, work in the construction field, and they took office with us in Tampa. And all through the pandemic, they continued to grow. And they've continued to grow with us.
Again, they took space as needed, and we managed their growth as it went on. You have companies that are going into new markets. Boston Consulting Group moved into, you know, Nashville. They opened an office at a WeWork. So, you know-- again, since you don't know what the future is, even more so today, we become the choice, and we allow members to grow with us.
Coinbase, you know, took space with us in San Mateo. So these are all different types of clients that we have that are entering new markets or growing in existing markets or they have a return-to-work policy starting in April or May and for them, they need the space to house their employees today. So, effectively, you know, this is our moment.
And to answer your question, if there is a, you know, hiccup of sorts, we don't know what that hiccup would be. But during, you know, a slowdown of an economy, flexibility becomes more the name of the game. I could very well see-- and we're seeing it today-- that clients would give up their large footprints and downsize. And so as they don't know how much to downsize, how much-- and the future is, they could very well come in a WeWork.
And we've seen that with a, you know, large search client in California who moved their corporate headquarters into a WeWork. And so we've seen, you know, fintech companies, you know, who grew a small office. There's, in Paris, a company called Qonto, and they now occupy an entire building with us.
So, you know, we're able-- the most important thing you have to appreciate a CFO wants is the lowest cost per person, you know, and we're able to provide that by providing, you know, the real estate and also providing our digital products of all access and workplace management. So you can actually optimize the real-estate needs and actually lower your real-estate costs.
So I think, you know, with the way we've created our holistic program, it seems to, you know, be what the future wants. And look, the largest companies, as CBRE and JLL have said-- that the flex market would go from 2 and 1/2% to 15% to 20% by the end of the decade. And if that is to be the case-- and we're seeing that in talking to our client base-- then, actually, there will be a supply-demand imbalance because today a very small percentage of commercial office is in the flex-- in the flex arena.
And if you look at the international markets-- look at London, Paris, Dublin, Milan, Southeast Asian markets-- you know, those markets are already in the 80-plus occupancy for WeWork and have very healthy margins. And we've shown the margins in those businesses are well over 30%. And so the US has lagged.
And we know why-- because the return-to-work policy has been slower. And it's starting to change and evolve, and that should benefit from us.
BRIAN SOZZI: Sandeep, before we let you go, about-- you know, you mentioned some tech names. About 25% to 30% of your tenants are, in fact, tech-- Meta and Amazon. These companies are cost cutting. They're laying people off. What are you seeing from those tenants looking into the second quarter?
SANDEEP MATHRANI: So, you know, it's an irony, right? The irony is the headlines talk about the layoffs, but if you actually look at prepandemic-- the prepandemic workforce of all these companies and you look at the postpandemic workforce of all these companies, after the layoffs, there has been substantial growth.
So the headlines talk about the layoffs. They don't talk about the growth from prepandemic to postpandemic. And if they had to bring these people back into work during the time they were growing the employee base in the pandemic, they were not looking for real estate, obviously, because there was a work-from-home policy. And so now, as a lot of these companies are insisting people come back, whether it be three days a week or four days a week or a hybrid schedule, you know, they are all reaching out to find space to accommodate their needs.
So until we all figure out what the right return-to-work policy is-- we're actually seeing demand across the board, whether it be tech companies, financial institutions, consulting companies, you know, even pharmaceutical companies. And you never think of a pharmaceutical company as a tech platform. We recently leased an entire floor to Moderna in Seattle, and their rationale was that, you know, effectively, we are-- want to take advantage of the tech layoffs, and we want to make sure we can hire that talent in Seattle.
So, you know-- so, actually, we think there's more emphasis on the return to work, you know, which will take up space, versus the thesis that they are layoffs. Because, once again, they have more employees today than they did prepandemic.
JULIE HYMAN: Sandeep, thanks for being here. Good to catch up with you. Sandeep Mathrani, alongside Yahoo Finance's Brian Sozzi, talking to us this morning about WeWork.
SANDEEP MATHRANI: Thank you so much for having me. Have a great day.
