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Landlords Weigh Out The Pros And Cons Of Having WeWork As A Sole Tenant

New York City’s office landlords are known to fill their buildings with a variety of tenants to alleviate any risk, but more are making exceptions for WeWork. Click To Tweet

The coworking behemoth now occupied 5 million square feet of space across the city where they are the sole tenant at five buildings. It also occupies over 50% of the space in at least a dozen other buildings.

WeWork’s upcoming initial public offering should properly test the strength of its business model that has left some landlords wary of the amount of space they lease to the coworking firm.

According to the Wall Street Journal, WeWork only guarantees 11% of its overall lease obligations, leading landlords to demand stronger guarantees from the company to reduce exposure.

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“More than 20 percent of one tenant, and I say to myself ‘is that too much for one building?” said Greg Kraut, managing principal of K Property Group, a landlord that has explored buying buildings with WeWork occupancy. “It allows you to get a tenant in and lease your building. But you’re going to sell it at a higher cap rate. It’s a risk that you’re willing to take.”

A recent Cushman & Wakefield study revealed that properties where WeWork took up a large amount of space traded at higher capitalization rates compared to similar buildings.

ABOUT Aayat Ali
Aayat Ali

Aayat is an editor for the Daily Digest based out of Kentucky. She has worked with local coworking spaces since August of 2017 and enjoys taking her firsthand knowledge to write about the fascinating, constantly evolving world of flexible workspaces. Feel free to reach out to her at [email protected] View all posts by Aayat Ali

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