WeWork, New York City’s largest renter of commercial space, may add extra risk for landlords when the next economic downturn hits as almost $3.1 billion of commercial mortgage debts has direct exposure to the company.
In previous years, despite the financial crisis hurting the residential real estate market, office markets held up well. S&P Ratings found that the market has strengthened since the crisis, with commercial vacancy dropping to 12.6% from its 16.5%.
Now, coworking spaces are at risk of losing their memberships in the face of recession and could see competition from established property companies.
S&P anticipates that coworking tenants will create big risks for landlords and investors in commercial mortgage debt. Additionally, there could be a conflict of interest between landlords and coworking lessees.
Such risks are relevant to investors due to coworking operators being such large tenants. If these firms are hit by a recession, it could cause the broader real estate market to take a tumble.
