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WeWork Continues Consolidation Spree with Acquisition of Spacious

Look out, world—WeWork is showing no signs of slowing their plans for industry-wide domination.

The We Company announced Tuesday that they will acquire on-demand workspace company Spacious—a rival that transforms empty space in restaurants during the day into co-working spaces. The acquisition, while relatively small (Spacious has raised around $9 million in private funding) would add to WeWork's ever-growing number of acquisitions. WeWork declined to comment on the price of the acquisition.

"WeWork is still in growth mode—they need to hit those growth numbers post-IPO, and a couple acquisitions would help them do that," says Matthew Kennedy, senior IPO market strategist at Renaissance Capital, a provider of institutional research and IPO ETFs. "It’s clear that WeWork is trying to expand beyond its traditional office space model. Spacious attempts to utilize underutilized properties as office space, like restaurants, and [WeWork] has a demonstrated ability to create premium work stations, so it does seem like a logical fit.”

While the terms of the acquisition are undisclosed, Spacious, which uses a membership model and is based in New York City, is just one of many co-working companies to be consolidated. In fact, even back in 2017, The Information reported WeWork's chief growth officer David Fano affirmed the company's strategy to “buy, build, [and] partner" on a greater scale. And they've certainly stuck to the plan.

Acquire and conquer

WeWork has long been on an acquisition spree, snapping up companies like Chinese co-working company Naked Hub in 2018, Singapore-based Spacemob in 2017, and even somewhat off-brand acquisitions like digital marketing company Conductor in 2018 and social group organizer Meetup in 2017. And so far this year, WeWork has only ramped up their spree with data platform Euclid as their first 2019 acquisition, mobile access platform Waltz in June, and real estate management platform SpaceIQ in July (to name a few).

According to CBRE Research for the 2nd quarter this year, WeWork is by far the most dominant operator in the flexible operator leasing space, with 71% market share.

But according to industry experts, WeWork may not be content with just their current portfolio—and their industry-wide consolidation likely won't stop anytime soon.

"That’s their whole differentiating factor—they want to be the go-to place for on-demand space," Santosh Rao, head of research at Manhattan Venture Partners, told Fortune. "WeWork wants to be ubiquitous, and to meet any needs for everyone. Big, small, anytime, anywhere—that’s their goal, that’s their mission." Because of their supposed everything-for-everyone mentality, Rao suggests, the Spacious acquisition "beef[s] up their portfolio" given the company's specialty in retail-level space.

Still, The We Company's recently-released S-1 raised more than one eyebrow on Wall Street over the hefty liabilities the company was taking on in addition to whopping losses. Kennedy suggests the company needs to stay on top of their losses and manage their growth.

But to D.A. Davidson's Barry Oxford, WeWork's latest acquisition fits with their overall strategy. “What did investors think they were going to do with the money? They were going to expand their growth organically … or ... acquire smaller companies that do the same thing and bring them into the same organization,” Oxford told Fortune. He believes WeWork's latest acquisition, while small, may be significant when paired with WeWork's capital and resources. "Imagine what WeWork will be able to do as far as marketing this and rolling this out on a huge scale," Oxford says.

In fact, Kennedy suggests Spacious may be the Airbnb or Uber of the co-working space through its model of leveraging underused properties—which, he believes, could peak investors' interest and be a "massive growth opportunity" given the ample number of eligible restaurants nationwide.

Spacious could not be reached for comment, but the company's CEO Preston Pesek said in a statement that "in WeWork, we have found much natural alignment across our visions for the integration of work, technology, and physical space."

As the latest company to join the co-working behemoth, Rao believes Spacious may be another way of "pulling people into their ecosystem" for the We Company.

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