The Nashville WeWork Tower near the Cumberland River downtown. Shutterstock

Every week, we get one step closer to the WeSingularity. The sprawling WeCompany, the recently created parent company of coworking giant WeWork, continues to expand and seems poised to enter every single aspect of its customers’ lives.

What other postmodern corporation, serving more than 400,000 members in 27 countries, has made investments in office space, retail, housing, preschools and college campuses, food startups, and a wave generator for inland surfing?

Early in the WeWork’s existence, co-founder Adam Neumann described his ambitions for the startup as a “physical social network,” something WeWork seems to embody more and more with each new addition to its mission.

The strategy, which includes building and managing entire offices for Fortune 500 companies, is akin to Airbnb seeking out the business-traveler market. WeWork made a name for itself flipping C-class office space into cool hangouts for budding entrepreneurs, and it has moved up the value chain right at the moment when corporate America is hungry for flexible spaces and more engaging offices.

“This represents a shift in real estate from a simple commodity to a consumer product,” says Scott Homa, senior vice president of U.S. office research for JLL, an international commercial real estate firm. “You used to go into the market looking for a warm, lit shell you could occupy in nine to 12 months. Now, it needs to be a much more immediate, consumer-friendly, consumer-centric product.”

WeWork has long been criticized for its large debt load; Vanity Fair called it “a $20 billion house of cards” while the Wall Street Journal said it was “fueled by Silicon Valley pixie dust”. The company has also been taken to task for its extensive number of long-term leases, leading many to accuse the “insanely overvalued” startup of simply playing office space arbitrage. When lead investor Softbank downgraded a significant investment from $16 billion to $2 billion, many read that as a sign of WeWork’s weakness.

It’s also true WeWork has yet to become profitable. Its final 2018 financial results, released yesterday, show that annual revenue more than doubled, to $1.82 billion, even as losses nearly doubled to $1.93 billion. The company would argue, as any good startup (and many of its peers contemplating IPOs) does, that this is due to a rapid—and healthy—period of expansion and investment, one expected to continue as investor confidence has meant the company has $6 billion cash on hand and a valuation of $47 billion. WeWork and coworking at large are also rapidly growing, and in many ways, shifting toward a more sustainable, less risky core business model.

Many see coworking and office space evolving, in tech parlance, toward a space-as-a-service industry.

“As fast as the industry has grown over the last two years, it’s easy to underestimate how much faster it will be in the next two years,” says Jamie Hodari, CEO of Industrious, another coworking-space operator that works with big companies.

“Every Fortune 500 company is in the midst of testing this out. Now that companies have really experimented with coworking, measured their outcomes, and seen how it works with a small team, over the next few years, they’re going to double down. This is an outsourcing industry. Companies really should just hand this off to a third party.”

Dave Fano, WeWork’s chief growth officer, believes that, in the long-term, companies won’t own and operate their own headquarters. Big firms will still want a splashy office in the urban core with a sign on top of the building. But why would you deal with the hassle of management and set-up, when WeWork and its competitors can achieve economies of scale and deliver a better experience for less money?

Bigger business, smaller risk

WeWork’s corporate pivot gives the company more stability through guaranteed revenue, as well as more funds for long-term expansion, which it’s been investing in high-end spaces in New York and London. It’s gaining scale in a way that many other coworking companies can’t match.

For instance, a large corporation looking for a new headquarters in Los Angeles needs office space that may eventually hold 1,000 or more employees. WeWork now has locations that measure 300,000 square feet or more, or take up entire buildings, and can service thousands of employees.

For small entrepreneurs looking for a coffee shop replacement, a few days a week at a WeWork is flexible. For massive global corporations, a three-year lease is considered flexible, compared to the standard decade-plus contract to take over new space.

“We’re an elastic solution for real estate,” says Fano. “We offer a strategic advantage on both ends.”

Enterprise clients, defined as clients who work for a company that employs more than 1,000 people, now make up 32 percent of the WeWork’s membership, and the company recently launched a service for mid-sized companies that is expected to attract 70,000 members by year’s end. The Powered by We spaces, a white-label service where WeWork runs a branded office for a specific corporate client, have grown considerably. The company now runs more than 220 such projects for firms like Sprint, UBS, IBM, Airbnb, Amazon, and Standard Chartered.

New corporate clients have significantly shifted WeWork’s lease portfolio; as of September 2018, the average agreement with a new tenant is 21 months, up from an average of 7 months in 2017. These agreements are also beginning to impact the company’s bottom line, and make what many see as a VC-funded expansion spree more sustainable. As of the fourth quarter of 2018, WeWork now has a $2 billion revenue backlog, due in large part to corporate clients. According to business analysts at CB Insights, “If [WeWork] continues to add co-management deals that cater to large corporations, it has a strong shot at living up to its sky-high valuation.”

“If they participate in delivering an end-workplace experience, it’s like going from being a butcher to being Peter Luger [the famed New York steakhouse],” says Industrious’s Hodari. “You’re moving from delivering a raw product to delivering the finished product.”

WeWork has already positioned itself as an option for remote workers and sales teams, and has become an important office provider for the diverse domestic workforce of companies like Expedia and Microsoft.