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Jonathan Price – CRE & Flex Expert
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What’s going on:    Â
WeWorks financial difficulties have created concerns not only for its investors and landlords but also for the 700,000 WeWork members who use its coworking spaces, according to Fortune. The company is considering options like renegotiating leases, selling assets, and creating an app to serve its customers better, but it also mentioned the very real possibility of bankruptcy. Â
WeWork’s members, who pay to use the facilities and amenities in its buildings, aren’t awarded the same rights as tenants in the event of bankruptcy. If the coworking company files for bankruptcy, members won’t automatically be pushed out of their office spaces, according to Forbes. However, the company is allowed to kick members out of their buildings if it decides to cancel the leasing agreements it has with landlords. Depending on the agreements, some members could get kicked out without receiving any refund for their membership fees. Â
Why it matters:Â Â
As one of the major providers in the coworking industry, WeWork’s outcome will have implications for the commercial real estate industry and the future of the coworking industry. The news of a bankruptcy could affect investors, landlords, members, and even other businesses that have adopted the coworking model. Â
WeWork’s financial predicament raises questions about the viability and stability of the business model that it used. In a post-pandemic economy, where remote and hybrid work arrangements are becoming more common, experts believe WeWork does not reflect the overall health of the coworking industry. IWG, one of WeWork’s major competitors, recorded a significant 48% profit increase so far in 2023. Other companies are expanding into suburban properties and even international airports to cater to workforce trends. Â
How it’ll impact the future:Â Â Â Â
If WeWork defaults or files for bankruptcy, it could have ripple effects across the coworking industry and commercial real estate markets across the U.S. Landlords may become more hesitant to offer short-term leases or coworking spaces, a trend that has the potential to impact small businesses and independent professionals who rely on flexible work arrangements. In the worst-case scenario, WeWork members might consider alternative workspaces and different lease arrangements.
In markets where WeWork has a significant presence, such as New York City, the impact on commercial real estate could be more pronounced, potentially leading to a decrease in demand for office spaces which in turn could negatively impact property values. As the coworking industry navigates these challenges, it will be important to watch how the market responds and adapts to shifting workforce trends and economic conditions.Â
