The"real business" of WeWork et al seems to be selling an entrepreneurial vibe to big companies. Lots of folks in my distributed company work at WeWorks around the country, and most of their neighbors work for big companies. One of my colleagues is almost fully surrounded by a Dish Network call center. WeWork will even custom build for big customers — in fact, their Enterprise landing page is a good an index to their view of the future as anything: https://www.wework.com/enterprise
I think the Short Answer is that the solo renters are the sizzle and the Fortune 500 is the steak.
The question is, why would a F500 company rent space from WeWork at a double-digit markup when they can do it themselves? This is not super hard or special stuff, and F500 companies need to do it enough that they can maintain the expertise.
If the answer is "wework allows us to be elastic with real estate as our needs shift", then WeWork will be in for a lot of hurt at the next recession. If the answer is "we are using a lot more remote or geographically-diverse staffers, and WeWork allows us to have small office space available all over the world", they might do okay. The single-company WeWorks described in the article lean towards the former, though.
The answer is - these are not core office buildings for those F500's. They want capitally efficient (e.g. minimal up front investment), fast to market and appealing to a desired workforce. GE wanting to set up a R&D center to hire 100x 25-40 year old developers in Austin? Great model. When we hit a recession, those are the first jobs to go and then they have preferable (e.g. not left sitting with the asset) ways of winding those centers down if needed.
Think of it like having 3-year Reserved Instances in AWS instead buying your own hardware and running your own data center. Which would you choose today?
In my limited experience -- there's a lot of corporate "innovation groups" or SWAT team kind of things that get put into a WeWork.
It's very rational -- if you are an "intrapreneur" and wanting to break out your team from the mothership, it's probably easier and faster to get your office space at a WeWork. Plus, you get a recruiting / lifestyle / hipness benefit from getting to be downtown with exposed brick, instead of out at the suburban office park with the sea of landscaped parking lots.
But my sense is that it's a high-beta customer base. When times are good and there's lots of corporate cash for high-urgency, high-concept stuff like innovation teams and new product skunkworks, a $25k/month WeWork bill is peanuts. When times get tight, that's going to dry up fast.
Similarly high beta on VC-backed startups. That cohort is pretty cyclical, though it won't disappear completely. I predict a similar % of Series Seed/A startups would still opt for a WeWork in a venture downturn as do today (but there will be many fewer of them).
Much lower beta on satellite offices and smaller professional services type groups -- they'll still show up to work, as it's a primary office for their primary business.
Wild card on the bootstrap / solo / freelancer stuff.
Also (IMO) sort of a wild card on the larger corporate buyouts of an entire floor or location. In crowded cities it really can be worthwhile to pay for the branded facilities management as the locations WeWork acquires are quite good.
However, and here's the big however. My understanding is that We's leases are LONG term and tend to have escalator clauses (they owe more rent to the landlord in the later years, faster than inflation). Which generally means their supply / cost structure is as good today as it's ever going to get. If the topline gets hit, which in a recession it surely will, the bottom line will take a double whammy as the escalators kick in.
So I'm not at a fortune 500 (fortune 1000 yeah) but we are expanding into a new city and waiting until our office population is enough to move into a full time space. I can not wait for that since we've completely outgrown their largest private office space and are spilling into random other offices here but it took a while to find the space we wanted and could grow into and do the build out. Flexport did that as well here in the city and moved into their own digs recently.
I think the Short Answer is that the solo renters are the sizzle and the Fortune 500 is the steak.