As workers flock to work from home, flexible office operators are struggling to stay afloat and have had to resort job cuts, requesting rent relief and attempting to renegotiate leases.
Just this week, WeWork informed staff that there would be another round of layoffs following news that the company did not pay its April rent at multiple locations.
Additionally, London-based firm Workspace reported a 50% dip in rents due at the end of March and said it expects to receive a much lower level of rental income.
IWG, the world’s largest serviced office provider, also scrapped its dividend and suspended a £100 million share buyback program.
It is no secret that flexible office firms have been particularly vulnerable to an economic downturn as many of them sign long-term leases on spaces from landlords, then rent them to customers on much shorter terms.
The current health crisis puts the industry at risk as many clients of these offices are startups or small businesses, who are facing their own financial struggles and are unable to afford rent.
Some operators are renegotiating payments to retain their members. For instance, IWG has proposed temporary rent cuts for small businesses contingent upon them committing to longer leases.
“If you’re putting all of your eggs in one basket – which is long leases and short rental income streams – and you go into a downturn or a natural disaster such as the current situation, questions about the survivability of the business can start to be asked,” said Mike Prew, an analyst at financial services firm Jefferies.