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Coworking Firms Hit By Recession Could Affect The Broader Market

WeWork, New York City’s largest renter of commercial space, may add extra risk for landlords when the next economic downturn hits as almost $3.1 billion of commercial mortgage debts has direct exposure to the company.

In previous years, despite the financial crisis hurting the residential real estate market, office markets held up well. S&P Ratings found that the market has strengthened since the crisis, with commercial vacancy dropping to 12.6% from its 16.5%.

Now, coworking spaces are at risk of losing their memberships in the face of recession and could see competition from established property companies.

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S&P anticipates that coworking tenants will create big risks for landlords and investors in commercial mortgage debt. Additionally, there could be a conflict of interest between landlords and coworking lessees.

Such risks are relevant to investors due to coworking operators being such large tenants. If these firms are hit by a recession, it could cause the broader real estate market to take a tumble.

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