Chatter of possible trouble for coworking giant WeWork has made the rounds, particularly due to being on the cusp of an economic downturn, which eventually led CEO Adam Neumann to take to CNBC to quiet concerns.
“In Q4 of 2018 we’ve seen a big drop in the market, WeWork has never grown faster,” said Neumann. “We would use the opportunity of a downturn to grow faster.”
It doesn’t help that the company’s latest financials from 2018 revealed that, while it doubled its revenue to $1.82 billion, it also doubled its losses to $1.93 billion.
Despite this, WeWork prides itself on being sustainable thanks to its deep-pocketed investors. But take that away, and the coworking firm’s extra cushion could cause it to tumble through a recession. There have already been signs of slowed investments after SoftBank slashed its proposed $16 billion investment into the company down to $2 billion.
Although they maintain to be the largest private office tenant in New York, London, and Washington D.C., its commercial leasing rates dropped at the end of last year which indicates that demand is slowing. For example, London’s leasing volume was down 17% year-over-year in the fourth quarter of 2018
Despite concerns from virtually numerous analysts, WeWork is seeing an economic downturn as a business opportunity, citing its experiences in other countries that have gone through recessions. It said it would be able to catch Fortune 500 companies who need to quickly downsize to a more flexible option.
“The existing business is profitable,” said Amol Sarva, founder of New York-based Knotel. “If the world were to change overnight, it would be a question of how much we want to grow.”