WeWork Recently Sold Its Education Businesses. Now It’s Turning to Education for Business.
WeWork recently sold its preschool and coding bootcamp. But it is not out of the education business yet. In an effort to find tenants for its coworking spaces, the office-leasing company is turning to a new breed of customers: colleges and universities.
Last week, New York University announced that it has leased nearly 7,000 square meters of WeWork space near its campus in Shanghai. It will convert seven floors of offices into classrooms, lecture halls and study rooms as the campus plans to accommodate some 3,100 additional Chinese undergraduate and graduate students for the fall.
NYU Shanghai, formed in 2012 as a partnership between NYU and East China Normal University, serves around 1,700 students. But due to travel restrictions and safety concerns, school officials needed to accommodate other Chinese students who would normally attend its U.S. campus, or another satellite in Abu Dhabi, but cannot due to safety concerns or travel restrictions.
Across the globe, WeWork operates about 800 co-working spaces in 145 cities. Yet there is plenty of room available as the ongoing pandemic has forced businesses to close offices and allow their employees to work from home. In New York City, where the company has about 100 workspaces, the vacancy rate reportedly exceeds 20 percent, or nearly double the average rate in Manhattan. That amounts to nearly 2 million square feet of unrented space.
That’s a big void that WeWork—which does not own most of the space that it subleases—is on the hook for. In other cities like Hong Kong, WeWork has vacated some of its offices.
New Needs for Colleges
Starting in April, the company saw an uptick in web traffic from educational institutions, according to Derek Feinman, its vice president of business development. “Our conversations with universities began to ramp up in June 2020, as it became apparent that the return to campus in the fall semester would come with a wide range of challenges,” he said in an email.
The company has dedicated at least 10 of its sales staff to work with colleges and universities that plan to physically reopen but need more room to comply with social-distancing guidelines.
NYU Shanghai, where low infection rates have led college officials to resume in-person classes, is the first to sign on. According to the NYU announcement, “some 75 faculty from NYU and other universities will join a portion of the NYU Shanghai faculty in leading nearly 200 courses for undergraduates and another 40 for graduate students at the temporary campus.”
Michael Horn, a senior strategist at Guild Education, says the idea could appeal to other U.S. universities with an overseas footprint, provided infection rates are low enough to allow for reopening. “If international students aren’t going to be allowed in the U.S., this can create some sense of intimacy and proxy for the campus life that they were promised,” he says.
Providing some semblance of physical community can supplement what is otherwise an online instructional experience, he adds. And it’s a selling point “especially if colleges are holding the line on charging students full tuition.”
That may be a harder sell in the U.S., and not just because flaring infection rates have led a growing number of universities to start the new academic year with remote learning. Driven by low interest rates, many colleges have been expanding campuses in recent years, Horn notes, to the point where some have “overbuilt.” It’s unlikely that traditional institutions will consider this option near their home campus, he adds.
According to data from The Chronicle of Higher Education and Davidson College, about 30 percent of U.S. higher-ed institutions are starting the fall “primarily” or “fully” online, while 23.5 percent are going “primarily” or “fully” in person. Another 14 percent are taking a hybrid approach. However, college officials have also been changing plans at the last minute, with more recently opting for online instruction.
Feinman says the company is “speaking with many of the top universities—both public and private—in the United States,” with a focus on those that serve overseas students who may have difficulty getting in due to travel or legal restrictions. Last month, the Trump Administration sent shockwaves—accompanied by outrage—when it declared that international students who were only taking online classes must leave the country. (That rule was rescinded after universities filed federal lawsuits.)
Interstate travel restrictions may also limit whether out-of-state college students return to campus. To that end, WeWork is also trying to get higher-ed institutions to pay for workspace memberships for their students, so that those who may lack reliable internet access or a suitable home environment for taking online classes can have a space to study from.
It’s a similar arrangement to the one that the company worked out with 2U, which builds online programs for higher-ed institutions. That deal allowed students to study out of any WeWork space, though the partnership recently ended, according to a 2U spokesperson.
WeWork officials did not disclose details about the length of NYU Shanghai’s WeWork lease, how much it paid or general pricing details for its leases to educational institutions.
The company may also host younger students as well. In a June interview with CNBC, WeWork CEO Sandeep Mathrani says the company has been in discussion with private schools in New York City to discuss the possibility of leasing space for classrooms. No deals have been reached yet.
Referencing WeWork’s previously dashed ambitions to house a private school, CNBC host Andrew Ross Sorkin quipped: “See, [WeWork co-founder] Adam Neumann’s original idea of having a WeWork school—it’s all coming full circle.”