The office space-sharing company WeWork said they have “substantial doubt” they can stay in business over the next 12 months.
In a quarterly earnings report, the company interim CEO David Tolley said they are suffering along with the entire commercial real estate industry.
“We certainly aren’t immune to multi-decade high vacancy rates and weak pricing,” David Tolley, the company’s Interim CEO, said in a call with investors. “Specific factors affecting membership demand include the unprecedented amount of sublease space available, including from our own landlords”
WeWork has 87 locations in New York, according to the company’s website. In its most recent quarterly report, WeWork said the majority of its 2023 revenue comes from New York, San Francisco and Boston.
New York’s commercial real estate market has softened significantly since the pandemic. According to a second quarter report from the commercial real estate firm Avison Young, Manhattan’s vacancy rate stood at 20% with 40% fewer leases being signed compared to before the pandemic.
However, experts said WeWork’s spiraling circumstances are an indicator of a poor business model, not a failing sub-industry within the commercial real estate sector.
“WeWork was a great idea, but a terrible business,” said Jordan Barowitz, a real estate consultant. “The concept of co-working has caught on, and WeWork now has dozens of competitors. If WeWork goes away, the people who work out of their spaces will find other places to work.”
WeWork received notoriety after attempting to go public in 2019, failing because of intense criticism about its spending and business model. It later went public in 2021.
The company continued to garner criticism for signing leases too rapidly and racking mountains of debt.
In his calls with investors, Tolley signaled hope for the sub-industry of shared office space.
“Fewer and fewer companies,” he said, “are willing to enter into long-term leases for geographically fixed spaces when they have relatively poor visibility on how that space may be used.”