Office sharing died with Covid-19. At the end of the last decade, this concept was all the rage, and one of its promoters, WeWork, was valued at almost $47 billion (€43.7 billion). Today, with telecommuting, the idea of office sharing has moved into the home, and WeWork has unoccupied space in city centers that it is paying too much for. On September 6, the company, now worth just $300 million, announced that it would renegotiate all its leases. As of June, WeWork had 777 rental locations in 39 countries and financial obligations of over $13 billion, according to the Financial Times.
In a press release, the company stated that it intends to take “immediate action to permanently fix our inflexible and high-cost lease portfolio,” a situation it claims to have inherited from “a period of unsustainable hypergrowth.” Among other things, the company will be leaving certain “unfit and underperforming locations.” Of course, its CEO, David Tolley, explained: “Let me finish by making one thing clear: WeWork is here to stay.” Except that the company has expressed doubts about its viability and, in the highly likely event of bankruptcy, lessors will be left with empty offices.
In the United States, the real estate crisis is above all an office crisis, as Americans are reluctant to return to in-person work, particularly in large cities such as San Francisco and New York. The mayor of New York, Eric Adams, is constantly urging his constituents to return to the office, arguing that “you can’t stay home in your pajamas all day.” But he has not succeeded in imposing a full return to the workplace on city employees. WeWork occupies only a small share of the Manhattan office market, around 1.5%, according to the Financial Times. Nevertheless, WeWork accounted for a quarter of new commercial leases in New York in the first quarter of 2023, and its collapse adds to the woes of a market that didn’t need it.
Tenants’ flight to quality
Some landlords saw this coming, changing tenants even if it meant lowering prices. For instance, Sage Realty leased premises previously occupied by WeWork to the Spanish bank Santander on the famous Madison Avenue. In New York, WeWork occupied premises that were sometimes aging, and its difficulties will widen the gap between modern New York – which invested in the Hudson Yards neighborhood just before the Covid-19 crisis and, more recently, the One Vanderbilt tower right next to Grand Central Terminal, which now offers the most beautiful view of New York – and buildings that have long been outdated and neglected.
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