Merck to open outpost at Center City WeWork, as big companies see coworking as a passage into Philly

Drugmaker Merck & Co., a longtime denizen of suburban offices in Pennsylvania and its home state of New Jersey, is establishing a Center City beachhead at a WeWork Cos. coworking location in the Market East district, the latest big corporation to use shared offices as a way to step lightly into central Philadelphia.

WeWork and Merck plan a ceremony marking the opening of the space Wednesday to be attended by WeWork executive chairman Marcelo Claure, who is also a senior official at WeWork owner SoftBank Group; elected officials including Mayor Jim Kenney; and representatives with the pharmaceutical company, according to an event announcement.

The drug company, which is based in Kenilworth, N.J., will occupy a 25,000-square-foot space with 205 desks, comprising an entire floor of WeWork’s three-story location at the 1100 Ludlow St. office building in the sprawling East Market development between 11th and 12th Streets, according to the announcement.

The announcement was shared with The Inquirer last week when WeWork planned to invite media coverage of the ribbon-cutting. Merck and WeWork later decided to keep the event private, according to a spokesperson for the coworking firm, who declined to make a company representative available for an interview. A Merck spokesperson did not respond to a phone message.

Merck operates in more than 140 countries, producing treatments for conditions including cancer, Alzheimer’s, and infectious diseases such as HIV and Ebola. The company employs more than 12,000 at its Pennsylvania labs, factories, and offices, including its manufacturing and distribution complex on 400 wooded acres in West Point, Montgomery County.

In taking its space at 1100 Ludlow, Merck is following in the footsteps of other national and multinational companies that have used coworking as a way to establish a foothold in Philadelphia without having to fit out its own space or sign a long-term lease, said Casandra Dominguez, research director at the Philadelphia office of commercial real estate firm Cushman & Wakefield Inc.

Others have included IBM, which is known to have occupied space in WeWork’s 1900 Market St. location, and Lyft Inc., which has had a presence at the Joynture coworking offices on South Street.

Irish software company Phorest, meanwhile, took a floor of coworking operator Spaces’ three-story location at the redeveloped Hale building at Chestnut and Juniper Streets for its U.S. operational hub. Spaces is a division of IWG PLC, the European shared-office giant formerly known as Regus.

Nationally, nearly two-thirds of companies use coworking to some degree, with many saying they expect to double their commitment to coworking over the next five years, according to a Cushman & Wakefield report on the sector in October.

“Coworking and flexible workspaces are allowing tenants from outside the market dip their toe in the Philadelphia office market, and are a great way for them to see whether it is a good fit for their company and open a more permanent satellite office in the city,” Dominguez said.

Merck also occupies WeWork space in other cities, including Boston and London, according to the release on the Philadelphia site.

Ravi Mahadevan, a leader at Merck in charge of the drugmaker’s flexible-workplace campaign and other operational strategies, said in an article on the company’s website that coworking space provides a way to set up shop in urban areas where its workers and job candidates increasingly reside.

“They want to be close to work, rather than spend their time in traffic or depending on a train schedule,” he said. “We’re responding to this change by offering employees new options for how and where they work.”

Kristina Tarnef, a Merck recruiter, said in the article that “being in the heart of the city allows us to tap into the best talent graduating from universities inside the city.”

For coworking operators, meanwhile, drawing big corporate subtenants such as Merck offers the promise of steady cash flow and reduces risk levels, because they are less likely to bolt for cheaper office space — or even a coffee shop — in an economic downturn, said Alex Snyder, who analyzes coworking businesses at CenterSquare Investment Management in Plymouth Meeting.

This is especially true for WeWork, which is attempting to establish a more staid reputation for itself after scaring off investors with money-losing activities that led to the departure of its previous chief executive, Adam Neumann, Snyder said.

“Part of being a real estate company is being boring,” Snyder said. “And getting big tenants and long-term leases is a way to get stability for a company that badly needs it.”