Recently, the We Company agreed to accept a $9.5 billion dollar bailout from the SoftBank Group, a Japanese investment company that saved WeWork from bankruptcy. Now owning 80% of WeWork, SoftBank has outlined a turnaround plan to right the sinking ship.
This turnaround plan and buyout is not quite enough of a safety blanket for landlords as they are still preparing for the worst case scenario. There are still many unknowns with WeWork’s future and landlords are taking preventative measures by evaluating and working on providing space that supports both specific company spacing needs as well as company economic growth goals. This objective sounds familiar, because this is exactly the strategy WeWork implemented into the leasing landscape throughout the United States, primarily in New York, Los Angeles and Boston. If WeWork decides to not renew space in some of the commercial buildings they currently occupy as a result of its financial difficulties, it is up to the landlord to have an alternative plan in place to lease this existing co-working space, ideally to the same subtenants of WeWork. Offering flex space to tenants is a new way for landlords to keep existing occupancy and providing for tenant needs, while avoiding WeWork volatility.
WeWork may not have yet been profitable, or even have a successful initial public offering in the near future, but it does not mean that co-working or flexible workspaces are no longer relevant in today’s market. WeWork’s market share of co-working space at the end of the third quarter of 2019 was 69%. Additionally, WeWork was New York’s top office space tenant in 2018, leasing nearly 700,000 additional square feet in Manhattan alone. Co-working space is here to stay and landlords need to understand and prepare for a life with or without WeWork.