In this post, our founders Tomal and Joe share their thoughts and provide valuable insights on WeWork and its community in light of the company’s recent announcement that there is ‘substantial doubt’ about its future.
There is a lot of uncertainty surrounding WeWork following their recent announcements and like most, I thought it was pretty alarming and shocking to hear. Having worked in the industry for a long time, I have friends and old colleagues who work for WeWork and my immediate reaction was concern for their job security. However, before jumping on the bandwagon to throw WeWork under the bus, I felt it was important to investigate. The obvious thing to do was to reach out to people I trust within WeWork.
I was expecting to find panicked people looking for new jobs, but actually, it was quite the opposite and the explanation made sense.
We are all aware of the Neumann antics. When they were at their peak, WeWork was instructed to take on as many buildings as they could, at any cost, on crazy long contracts. The consequence: WeWork was paying too much for non-profitable buildings and being stuck in a lease for many years. So, what to do?
Well, renegotiate the lease. But the landlords are quite happy receiving a high rent, so as you can imagine, there has been reluctance. How do you get them to the table?
Well, you publicly announce you are under threat and threaten them with bankruptcy…
Fortunately, these issues are mostly in the US. The London market has continued to grow and is profitable. For that reason, we have seen continued expansion/investment in the London market in recent months. Unfortunately, such news and drastic measures are still unsettling and the future of WeWork is still unpredictable. I personally don’t think we are going to see the end of WeWork just yet, but I don’t think anyone can be certain about what the future holds.
I listened to the “WeCrashed” podcast a few years back. The final episode focused on the organisation’s future following Neumann’s farewell, with the main focus being on employing a CEO with a real estate background. It all seemed logical and rational, as though the company had found some solid ground.
The recent news has undoubtedly caused disruption and uncertainty for plenty of tenants across the UK. We have seen fewer smaller business transactions this year. Our clients who were taking 10 desks a year or so ago have settled into a new way of working: hybrid, from home, office shares, coffee shop meetings, fully remote. It’s undoubtedly working for some and perhaps WeWork is just a victim of the post-COVID industry changes we have all seen.
I do personally think WeWork has a good product. Their spaces are desirable, affordable and I think designed quite well. They negotiated leases well with landlords, have done high-quality fit-outs and built an enviable customer base. It’s highly unlikely WeWork won’t be a major player for years to come.
The only problem is to change space, to make it accommodate larger workplaces and improve the business; it takes investment. It seems like there isn’t much money in the bank when it’s needed most. Perhaps the consequences of the previous ownership’s naivety and/or ambition are only now starting to show.
Below are some of the measures we recommend that all business owners should be taking to safeguard themselves as best as possible:
Step 1 – Speak to your WeWork account manager to understand WeWork’s response to the recent news. Perhaps this will provide some comfort; if nothing else, it will open up the channels of communication needed in situations like this.
Step 2 – We would speak to a tenant rep, such as ourselves and just have an open discussion. What’s the risk? What’s on the line if it does all fall to pieces and what can you, the tenant, do?
Step 3 – Not all co-working providers are struggling; there are small and medium providers who are thriving. Perhaps being more nimble in a crisis has given them an edge. Serviced offices are amazing for various reasons; WeWork’s struggles aren’t everyone’s and it could be a good time to explore some alternative options.
Step 4 – Ensure you are aware of your lease break and have plans A, B and C. We are going through the same thing and are open to talking through our plans.