On the 300 block of East Houston Street last week, construction workers continued the renovation of the Grant and Kress buildings in preparation for WeWork, the global shared-office company, to move in some time next year. While the company has multiple locations in Houston, Dallas-Fort Worth and Austin, this would be the first one for San Antonio, and would play a huge role in the middle of its budding tech district in terms of reputation and size.
While all this work was going on, however, it was impossible to ignore the negative press WeWork’s parent company, We Company, was receiving in New York City, where it’s based. One simply has to search “WeWork” in Google News to read the list of bleak headlines.
Listening to analysts in news reports last week, in particular, in the Wall Street Journal, one would be justified to doubt, at least slightly, WeWork’s eventual move into the Grant and Kress buildings, which would happen next year at the earliest.
GrayStreet Partners, the buildings’ landlord, is in the middle of a whopping $43 million refurbishing of the adjacent buildings, a project that will conjoin the Grant and Kress, creating 75,000 square feet of office space on the upper floors (all for WeWork), while also adding a 15,000-square-foot food hall on the ground floor. Also, a large portion of the Kress’ brick wall facing east has been punched out for a giant window. These are major renovations.
Meanwhile in New York City, WeWork’s image has taken a beating since mid-August, when the company released a prospectus in anticipation of its initial public offering (IPO). The figures are staggering by any measure: WeWork reports loses of roughly $900 million during the first six months of this year, and nearly $2 billion the past 18 months.
Concerns have swirled around the company’s solvency and management structure, which have resulted in a fast depreciating valuation. In recent weeks, CEO and co-founder Adam Neumann stepped down, and the company postponed its entry into the stock market to 2020 at the earliest.
The reaction has not been good.
From CNBC on Tuesday, “WeWork property defaults may be next after failed IPO, says mega-developer Don Peebles.” The company said last week it expects to cut 2,000 jobs, according to Bloomberg.
To be fair, other pieces of analysis I’ve read say more leases, i.e., expanding its cash flow, is exactly what the embattled company needs. The new CEO duo is cutting costs, including selling WeWork’s private jet. The company opened its 20th office space in the Los Angeles area last week. This week, it is celebrating a new office space in Kobe, Japan.
Why is this important in San Antonio? Let’s first look at WeWork’s presence in Texas.
It has 11 locations in the Dallas-Fort Worth area, seven locations in Austin and four in Houston. A prominent Dallas developer who is landlord to WeWork in multiple locations told the Wall Street Journal he was concerned about the company’s future. If WeWork were to scale back, you’d think it would still maintain a presence in Texas’ largest markets.
In San Antonio, a big part of Houston Street’s comeback rests on WeWork occupying 75,000 square feet of space inside the Kress and Grant buildings.
GrayStreet Partners declined to comment, only to confirm that it has a lease signed with WeWork. It’s unclear how long the lease is for.
WeWork is similar to Geekdom, the locally-run shared office space in the Rand building, also on Houston Street, in that individuals and small businesses can use the open space via memberships. Full disclosure: The Heron is an active user of Geekdom, which charges individuals $50 per month to use. At WeWork, individual memberships start at $45 a month. Both companies also cater to smaller start-ups. But WeWork also leases large swaths of space to more corporate entities, as well. For example, in New York, IBM is a WeWork tenant.
If it follows through on its commitment, WeWork won’t be the largest tenant on Houston Street. That distinction goes to Frost Bank, which now occupies more than half of the 460,000-square-foot, newly-opened Frost Tower. Currently, the city of San Antonio is renovating the older Frost Tower, also on Houston Street, which will house presumably a few hundred workers.
But WeWork will bring that cool factor, that certain New York City, start-up panache to Houston Street, which has become the home to San Antonio’s emerging tech district—joining development bootcamp Codeup (inside the Vogue), company lifeguard Scaleworks (inside the Savoy), and, of course, Geekdom.
It will bring more office workers to the street. WeWork’s presence will say loud and clear that yes, indeed, Houston Street is back, but in a tech-office-culinary kind of way, instead of the retail role which defined the avenue for decades.
It’s worth noting that GrayStreet is due to receive $1.25 million in city incentives related to the Grant and Kress rehab. Those dollars are not contingent on WeWork moving in, the city confirmed last week.
For this report, WeWork, through a spokeswoman, declined to comment.