Key Takeaways:
– The bankruptcy filing of WeWork presents an opportunity for other coworking companies and landlords facing high vacancies.
– WeWork’s bankruptcy filing resulted in the company leaving behind several locations and high-end furniture.
– The collapse of WeWork could have a silver lining for competing coworking companies and landlords who hold billions of dollars in loans.
– Demand for flexible office space remains strong, and other coworking companies could use the spaces left behind by WeWork.
– Coworking is expected to continue thriving despite WeWork’s downfall.
inman:
Rather than a demise of coworking spaces, experts say WeWork’s collapse presents a silver lining for other coworking companies and landlords facing higher vacancies.
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Rather than signaling an end to coworking spaces and a doomsday for downtowns, WeWork’s bankruptcy filing last week signals an opportunity for startup or existing flex space providers, experts say.
Shortly after announcing it had filed for Chapter 11 bankruptcy protection, WeWork released a list of the 69 locations it was walking away from, many of them in New York City. The company said it would leave behind the high-end furniture and other fixtures it used to outfit the offices.
This marked the latest chapter in the collapse of a company that was once valued at $47 billion. But the stunning downfall could hold a silver lining for competing coworking companies and the landlords who hold billions of dollars in loans that are at risk because of the collapse.
Mark Morris | Work Hive SLC
“If they can get a new space operator in there, maybe they’re bringing in less than WeWork [promised to pay], at least they’re not left holding the bag,” said Mark Morris, who owns the Salt Lake City-based coworking company Work Hive, which opened its second location last year.
Some of the leases WeWork walked away from were tied to $1.85 billion in debt, according to an analysis of the company by KBRA, a firm that analyzes commercial debt.
Many of those buildings — and others where WeWork is trying to renegotiate its existing leases — are in downtowns that are struggling through a period of high office vacancy that has tanked the value of buildings. WeWork’s demise is another pressure on the owners of those buildings who are already having a difficult time landing long-term tenants.
Michael Abrams, a flex space consultant, said he didn’t expect WeWork’s downsizing to have a major effect on the broader commercial real estate market.
“Do I expect any major issues in commercial real estate from this filing? Not really,” Abrams wrote on LinkedIn. “We will see defaults from landlords but we have been observing these defaults for over the past year.”
Demand remains strong for flexible office space, Abrams said.
“For all of the 40 leases being rejected in New York City, they represent about 1,500,000 square feet of office space and I suspect, depending on the landlord and their financial exposure, they might be able to transfer operations over to another operator,” Abrams wrote. “So much depends on the location, the class of building, floor plate size and the interior design.”
WeWork has already announced it would be giving 217,000 square feet of leased space in Long Island City to competitor Tishman Speyer, which operates a coworking brand called Studio.
“We are pleased to come to an agreement to transfer our operations at The JACX to Studio by Tishman Speyer,” a WeWork spokesperson told Bisnow. “We are grateful for Tishman Speyer’s partnership and look forward to working with them on a seamless transition of operations.”
Businesses and workers who had agreements in place with WeWork will continue on the same agreements with Studio until they expire, the outlet wrote.
KBRA analysts said other coworking companies could use the existing spaces.
Indeed, after leaving behind its furniture and other items required to run a flexible working space, WeWork effectively opened the door for competitors to take over the vacant spaces.
Also locations where co-working startup has a great chance to start
Building owner has no interest in running a co-working, and if you can get up and running quickly, the owner would be very inclined to try something. Either rev share or short term lease
Some nice fitout there
— Bobby Fijan (@bobbyfijan) November 7, 2023
“Building owner has no interest in running a co-working, and if you can get up and running quickly, the owner would be very inclined to try something. Either [revenue] share or short term lease.”
For all the attention garnered by WeWork’s bankruptcy, Morris said coworking will continue to thrive.
“The fact is WeWork has 800 spaces across the planet and there’s 40,000 coworking spaces across the planet,” Morris said. “They’re just the name brand everybody seems to recognize.”
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Property Chomp's Take:
The recent bankruptcy filing by WeWork, once valued at $47 billion, has left many questioning the future of coworking spaces and the impact it will have on landlords facing higher vacancies. However, experts believe that WeWork's collapse presents a silver lining for other coworking companies and landlords.
WeWork announced that it would be walking away from 69 locations, many of which were in New York City, and leaving behind the high-end furniture and fixtures used to outfit the offices. This move opens up an opportunity for competing coworking companies and landlords who hold billions of dollars in loans that are at risk due to the collapse.
While WeWork's downsizing may lead to defaults from landlords, it is not expected to have a major effect on the broader commercial real estate market. Demand for flexible office space remains strong, and other coworking companies have the opportunity to take over the vacant spaces left by WeWork. Additionally, landlords who have no interest in running a coworking space may be inclined to partner with new operators on a revenue-sharing or short-term lease basis.
Despite WeWork's bankruptcy, experts believe that coworking will continue to thrive. WeWork may be a recognizable name, but there are thousands of coworking spaces across the globe. The downfall of one company does not signify the demise of an entire industry.
In conclusion, WeWork's bankruptcy filing presents an opportunity for other coworking companies and landlords to step in and fill the vacant spaces. The demand for flexible office space remains strong, and the collapse of WeWork should not have a significant impact on the commercial real estate market. Coworking is here to stay, and the industry will continue to evolve and thrive.
