A12| Wednesday, September 11, 2019 THE WALL STREET JOURNAL.
who works as a curatory man-
ager for Bob’s Red Mill, a natu-
ral foods company.
His youngest, Raelin, has
been shooting apples since she
was 4. “It’s a good entertain-
ment for the kids,” he says.
The apple artillery earned
the orchard $20,000 in 2018,
according to Ms. Luecht. The
orchard paid about $5,900 each
for the cannons from Lewis
Agritainment, a company based
in New Era, Mich.That company’s owner, Scott
Lewis, also runs a working farm
and petting zoo. He says he
sells between 60 and 70 can-
nons a year and has an eye on
expanding his sales to Europe
and China.
The other major competitor
in the food-cannon field is Ca-
jun Country Corn of Pine Grove,
La. Owner Donald Courville
claims to have made the first
commercially sold corn cannon.
His company charges as muchas $6,435 for its Pumpkin
Blaster and $5,335 for its auto-
loading apple cannon.
Mr. Courville uses the guns
on his own farm, too. When a
youth group visits, he might
hold a shucking contest that
leaves him with plenty of corn
to shoot.
He describes his side busi-
ness as niche but steady, with a
sales pitch that plays to small
farms trying to get creative to
stay above water.Landlords
Imitate
We Wo rk
FROM PAGE ONE
Jeffrey Hines, Gerald Hines and Laura Hines-Pierce of office landlord Hines Interests are countering
flexible-space firms with similar offerings of their own. Below, one from landlord Tishman Speyer.Ethan Kenoyer, 17, fires the corn cannon with Erin Howell-Conner at a farm in Cumming, Iowa.RACHEL MUMMEY FOR THE WALL STREET JOURNALket, less than half the price it
sold for in 2012.
Mr. Howell charges custom-
ers $2 to fire four shots from
his corn cannon. By his calcula-
tions, that comes out to $100 a
bushel. About two acres of corn
out of the 100 he grows will
end up airborne.
He admits that it may sound
wasteful. But farms often use
their worst fruits and vegeta-
bles for shooting, including
many they can’t legally sell as
food.
And when the guests are
gone, he sometimes fences in
the area around the silos for
his goats to eat everything
clean.
Jim Kessinger, owner of
Plumper Pumpkin Patch and
Tree Farm at the edge of Port-
land, Ore., says the wormy ap-
ples he stuffs in a cannon are
worth more than his nicer ones
sold as food due to the weak
apple market.
He calls the produce he fires
his farm’s tossed salad depart-
ment. (Not all produce works
so well: Onions exploded in
mid-air before hitting anything
when he tried them.)
Visitors can fire pumpkins
ranging from 1 to 3 pounds and
Continued from Page One
Hines Squared. Hines will con-
tribute office space. Industri-
ous and Convene will operate
it. The locations will compete
with WeWork, but Hines says
it remains open to leasing
chunks of its space to WeWork
where the two don’t both have
flexible, co-working locations.
Hines Squared’s first four
locations—in Houston, At-
lanta, Salt Lake City and Cal-
gary, Alberta, and each called
“The Square”—offer food and
beverage services plus meet-
ing and event areas. These are
open both to businesses that
lease Hines Squared flexible
space and to tenants else-
where in the building that
have conventional long-term
leases with Hines.The obstacles
Executives of the co-work-
ing startups say landlords face
big disadvantages in their ef-
forts to respond by getting
into the same business. For
one thing, landlords are far
behind in developing the data
analytics that co-working
firms use to track employees
and visitors as they move
within offices and use desks,
conference rooms and other
spaces, the co-working firms
say.
Also, while a landlord such
as Hines can offer tenants op-
tions in a building, co-working
firms say they have offerings
in many buildings in many cit-
ies and many countries. We-
Work has more than 500 loca-
tions in over 110 cities.
To try to neutralize that
advantage, landlords are tak-
ing steps that include being
uncharacteristically open with
one another. An “owners
council” that includes Hines,
Brookfield Asset Management
Inc., Blackstone Group LP, RXR
and British Land has quietly
started to meet to discuss the
threat of technological change
and how they might join
forces to deal with it, accord-
ing to people familiar with the
matter.
A major topic is the threat
posed from co-working.
“We’re all trying to explore
this brave new world to-
gether,” said Hines’s Mr.
Kuntz.3 to 5 inches in diameter from
one of his farm’s three cannons
at four dead cars in a field.
That includes his old family
minivan. The only thing pro-
tecting the cars is how un-aero-
dynamic pumpkins can be.
“They might be spinning up
one time, and down the next,”
he says. “Good luck hitting any-
thing.” Mr. Kessinger has prom-
ised anyone who gets a pump-
kin through a window about
400 feet away the title to that
car.
So far, no one has taken him
up on the offer. He’s confident
the pumpkins could fly a quar-
ter-mile if he’d crank up the air
pressure more.
Thirty years ago, people
might buy 10 bushels of apples
during a farm visit, says April
Luecht, whose family owns
Stepp’s Hillcrest Orchard in
Hendersonville, N.C. Now some
ask if they can buy four individ-
ual pieces of fruit.
To help make up for lost rev-
enue and keep customers com-
ing, her orchard just added its
third apple cannon in time for
this September and October’s
high season. Visitors had been
waiting 30-plus minutes to
shoot in previous years.
“When they hit a target, it’s
just applesauce,” Ms. Luecht
says. “It makes a lot of noise.”
Ed Gritsavage says he and all
five of his children, ages 6 to
14, enjoy firing the cannon at
Stepp’s.
“It feels pretty good. It’s got
a nice, powerful shot to it,”
says Mr. Gritsavage, a 43-year-
old resident of Hendersonville“All these people who have
corn mazes? Well, guess what.
They’ve got ready-made ammu-
nition,” he says.
Other farmers with a knack
for tinkering, including Mr.
Howell in Iowa, build their own
cannons. Some fashion braces
to limit their apparatus’ range
of motion so that it doesn’t
swivel in the direction of unin-
tended targets.
Farmers and cannon-makers
say that to keep customers pro-
tected—and to appease their
insurance companies—those
kinds of features are essential.
They must also be able to let
employees safely reload with-
out visitors accidentally firing.
Customers aren’t allowed
within 100 feet of the pumpkin
cannon at Stade’s Farm and
Market in McHenry, Ill.
It has a 42-foot barrel made
from an old water main that
weighs over a ton and shoots
as many as six pumpkins at a
time.
Vern Stade, the farm’s
owner, estimates he’s poured
$30,000 and countless hours
into the cannon since building
it in 2003.
He and one friend—“Green
Bay” Bob Dow, nicknamed for
his unpopular choice of NFL
teams in Bears Country—are
the only two people allowed to
fire it.
Mr. Stade says his cannon
goes through new target vehi-
cles every couple of weeks.
“We’ll just shoot at it until
you can’t even tell it’s a truck,”
he says. “It’s a ball of crinkled
metal.”outflank a well-funded coun-
terattack.
The dynamic is especially
important for WeWork as its
parent company, We Co., pre-
pares an initial public offering
that’s already showing signs
of trouble. We is facing inves-
tor skepticism over its gover-
nance, business model and
ability to turn a profit while
continuing to grow. It now is
pondering a valuation that
could fall below $20 billion,
versus the $47 billion where it
last raised private capital.
We said in its IPO filing
that 40% of WeWork’s busi-
ness now seeks to sign up
larger enterprises, rather than
the smaller entrepreneurs the
firm initially targeted with
deals offering flexible lease
lengths and amenity-filled
work spaces. And the WeWork
sales force now operates much
like traditional office brokers.
“We have disrupted the
largest asset class in the
world—real estate,” We’s IPO
statement boasts.
Amol Sarva, CEO of another
flexible-space startup, Knotel
Inc., shrugs off the efforts of
the legacy landlords, saying
they have been notoriously
slow to adopt new technology.
“This movie has played many
times before,” Mr. Sarva said.
“Life will be hard for incum-
bent businesses that try to
compete with the newcom-
ers.”
Some co-working startups
are willing to create partner-
ships with the landlords in
which expenses and profits
would be shared. WeWork un-
veiled one with landlord RXR
Realty LLC in May to operate
90,000 square feet at 75
Rockefeller Plaza in New York.
“We do want to align with the
landlord,” said WeWork’s chief
real-estate development offi-
cer, Granit Gjonbalaj, earlier
this year.
No dice
Certain landlords aren’t
buying it, even going so far as
to refuse to lease space to We-
Work. “Why would a landlord
fund someone who is trying to
disrupt their entire business,”
said Anthony Malkin, CEO of
Empire State Realty Trust,
owner of the Empire State
Building and other structures.
If any industry looked ripe
for disruption, it was the busi-
ness of leasing large blocks of
office space to corporate cli-
ents. Not much has fundamen-
tally changed in that industry
since the first skyscrapers
filled up more than a century
ago. In most cases, landlords
still negotiate with their ten-
ants, who sign rental agree-
ments of 10 to 15 years that
offer little wiggle room.
The launch of WeWork in
2010 began to change that. Al-
Continued from Page One
though co-working makes up
only a tiny share of all office
space, it has increased about
23% annually and could ac-
count for an eye-popping 30%
of the office market by 2030,
according to Jones Lang La-
Salle Inc., a provider of com-
mercial real-estate services
that does business as JLL.
Co-working “may be the
biggest disruption to real es-
tate since the invention of the
elevator,” said Rob Speyer, the
CEO of Tishman Speyer.
Traditional landlords have
long required most tenants to
make some of the capital com-
mitments to outfit the bare
space, drawing up leases so
detailed they could take six
months to negotiate. The co-
working firms offer deals exe-
cuted quickly and with flexi-
bility virtually unheard-of in
the office-building industry.
This especially suits tiny
businesses with uncertain fu-
tures. But some of the tenants
that hold the long, traditional
leases took notice and wanted
the same flexible terms, in a
world of accelerating changes
in businesses and space needs.
Verizon Communications Inc.
has signed more than 60 flexi-
ble-space deals with co-work-
ing startups world-wide.
A co-working firm might
charge $110 per square foot
per year for space that a largelandlord would lease directly
to a tenant for only $50, said
John Vazquez, Verizon’s head
of real estate. Yet the costs
come out about the same, he
has found, because flexible
space is more efficient and the
co-working firm, not the ten-
ant, spends the money to out-
fit and design the space.
”If I can use someone else’s
capital and shorten my time
commitment and my financial
commitments, how is that not
a win for me?” Mr. Vazquez
said.Although nabbing a piece
of this higher-rent action is
one incentive for landlords to
get in the flexible-space busi-
ness, their move is mainly de-
fensive. Building owners are
threatened by budding rela-
tionships big companies such
as Verizon develop with co-
working firms.
Once co-working firms de-
velop ties to a large corporate
tenant, they can steer it to
their other locations acrosstown or in other cities and
countries. So building owners
need to worry about the ero-
sion of their own relationships
with those big tenants.
UBS Group Inc. recently
hired WeWork to redesign and
help it operate a 100,000-
square-foot space in Wee-
hawken, N.J., that houses
parts of UBS’s wealth-manage-
ment and municipal-finance
businesses. As UBS considers
future expansions, it consults
with WeWork, said Marc Mon-
tanaro, the Swiss company’s
head of human resources.
Hines, which develops and
manages a wide range of com-
mercial property, first noticed
two years ago that potential
tenants were also talking to
co-working firms. “It was
clear that the world was
changing and that in some
way, shape or form we had to
respond,” said CEO Mr. Hines.Partnerships
Shifting even a part of its
office space to a flexible-space
model wouldn’t be easy. Hines
structures most of its build-
ings as partnerships with
many investors. Each part-
owner would have to be per-
suaded that the expense of
creating co-working facilities
was justified.
Hines also would have tofigure out how to share prof-
its among executives who
worked for the co-working
business and those responsi-
ble for the buildings in which
the co-working spaces were
located. “That’s always an in-
teresting discussion in our
shop,” Mr. Hines said.
The leadership felt it had
little choice. At several meet-
ings, Mr. Kuntz, whose role is
chief innovation officer,
showed other executives
slides of how online travel
agencies such as Priceline and
Expedia had sucked billions of
dollars of value out of the ho-
tel business.
By coincidence, Fifth Wall,
a venture-capital firm special-
izing in real-estate technology,
began talking to Hines about
an alliance to tackle the same
subject in spring 2017. Soon,
Fifth Wall co-founder Brad
Greiwe was meeting with
three generations of the Hines
family: Gerald, Jeffrey and
Jeffrey’s daughter, Laura
Hines-Pierce, who is increas-
ingly involved.
“The idea was that they
would invest in us and we
would act as a window into
the early-stage venture-capital
ecosystem,” Mr. Greiwe said.
The parties formed a team,
led by Hines’s Mr. Kuntz.
Hines considered building a
co-working operation from
scratch, but speed was impor-
tant. So it decided to find a
partner or partners among ex-
isting co-working startups. It
set up a selection process,
which included pitches from
co-working startups Industri-
ous LLC, Convene and Knotel.
To get an unvarnished view,
Mr. Greiwe said he would drop
in anonymously on those
firms’ locations.
Tension was sometimes in
the air as buttoned-down
Hines executives met with
tech entrepreneurs in hoodies.
“There were hints of ‘Are we
friends or are we foes?’ ” Mr.
Greiwe said.
Hines didn’t invite WeWork
to the process. The Fifth Wall
team felt at that time that
other co-working firms would
be more open to joining forces
with landlords.
Hines chose Industrious
and Convene to be partners inSpaceRace
Co-workingbusinesseshavebeenexpandingrapidlyandare
dominatingthemarketfornewofficespace.U.S.co-workinginventory*New demand measured in terms of the amount of new space occupied by tenants over a time period
Note: 2019 is through June 30.
Source: JLLCo-working'sshareoftotal
newU.S.officespacedemand*100020406080million square feet2010 ’50010203040%2010 ’Corn
Cannons
Reap Cash
A CEO calls flexible
space real estate’s
biggest disruption
since the elevator.FROM TOP: SCOTT DALTON FOR THE WALL STREET JOURNAL; GENSLER/TISHMAN SPEYER