WeWork, the big kahuna of the co-working industry, to the degree this industry even has big kahunas, is widely reported to be seeking to renegotiate all of its leases.
Why? To drive down its cost base and achieve a “sustainable operating model.” Oh, and to avoid going under.
According to a report this week in The Real Deal, WeWork held a very brief conference call with its landlords to inform them that it will seek to renegotiate its leases. And also seeks to exit underperforming locations.
In a letter posted this week by WeWork CEO David Tolley, the company explained its actions.
“Despite the important actions we’ve taken over time to improve our company and real estate footprint, our current lease liabilities – which were over two-thirds of total operating expenses in the second quarter – still remain too high and are dramatically out of step with current market conditions,” Tolley wrote.
“We are taking immediate action to permanently fix our inflexible and high-cost lease portfolio to achieve the sustainable operating model that we need to serve our members for many years to come. By addressing this reality now, we will be able to continue investing in and innovating our business on behalf of our members.”
The Company That Cried Wolf
The Real Deal reached out to several of the landlords on the call, on background, to gauge their reaction. The landlords expressed some boy who cried wolf sentiments but generally seemed willing to hear the company out. Better to renegotiate than to just stop collecting rent, the sentiment appeared to go.
WeWork and its travails following the departure of its erratic founder Adam Neumann has been a topic on Localogy Insider. It has also popped up on Localogy’s This Week in Local podcast.
In May, on Episode 23, we discussed what may yet be an opportunity for WeWork – enterprise deals with companies that need a place for hybrid workers to congregate in non-HQ cities. The example we cited was an Amazon lease in London.
In that same thread, Co-host Mike Boland suggested that WeWork, given all the baggage associated with the company, should rebrand.
For whatever reason – and cost is a very likely one – no such rebranding has taken place.
