Following the fallout of WeWork’s postponed IPO, co-founder Adam Neumann was ousted as CEO and the company revealed it would no longer be going public this year in order to focus on its “core business.”
Moving forward, reports are revealing that the company’s financial standing may be worse than expected. Its S-1 filing showed it lost $2.1 billion in the last 12 months, and now fears it may run out of money after the first quarter of 2020. Now, the word “bankruptcy” is in play, which could impact markets that the coworking company has a huge presence in.
“It’s a company that has circa four million square feet in London in seven years, which is phenomenal,” said Eugene O’Sullivan, a director of commercial property firm Morgan Pryce.
WeWork is central London’s largest tenant, after the UK government, and as of January 2018, it had leased 2.6 million square feet space.
The buildings it offers to its customers are leased on long-term rates which allows them to receive properties rent-free, but what happens when that period runs out and a recession happens?
O’Sullivan sees that WeWork’s scale will be retracted, but will not entirely vanish from London.
Still, more than just the property market will be impacted by a bankrupt WeWork. It could also face an economic shake-up since workers in the company’s offices add over £75 million per year into the local economy.
Overall, the effect it has on the market will be more of loss in confidence around the coworking business model, while allowing competitors to raise money to expand.