WeWork warning could give regional property markets a wobble
Global serviced office company WeWork has cast “substantial doubt” about its own future.
The self-style Uber of the office world, which has spaces in prestigious locations in Manchester and Birmingham city centres amongst its UK sites said market conditions globally are “difficult” and has a year to improve its cash position by raising more money on the markets, or become profitable by selling more office space.
Backed by Japanese tech giant Softbank, WeWork saw revenue plummet globally during the pandemic, then as more people in its target range continued to work flexibly and from home offices, that trend suppressed demand too.
In a statement to US markets WeWork said: “Substantial doubt exists about the company’s ability to continue as a going concern.
“The company’s ability to continue as a going concern is contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”
WeWork secures sites on a lease basis and then sublets the space flexibly. It is now likely to put pressure on landlords to reduce rents or risk a catastrophic breach.
In Manchester, Dalton Place, the former offices of KPMG, is WeWork’s first self-contained building over seven floors of workspace and is owned by Tesco Pension Fund.
Their 55,000 sq ft office suite at 55 Colmore Row in the heart of Birmingham is leased from Nuveen Real Estate who bought the site for £98m in January 2018 from IM Properties and maintained the strategy of holding out for the right occupier rather than filling the space.
It was claimed at the time that the deal set a “record headline rent for Birmingham”.
WeWork boasts 512,000 ‘members’ across serviced offices in 33 countries, mainly tech companies, but also professional services firms.
Deloitte are currently in a WeWork space ahead of a move to new purpose built offices near Victoria train station in Manchester.
But a downturn in tech company expansion hasn’t helped WeWork either. A recent report by global consultants McKinsey said demand for city centre spaces was expected to remain significantly down on prepandemic levels.
“Demand for office and retail space in superstar cities will remain below prepandemic levels. In a moderate scenario that we modeled, demand for office space is 13 percent lower in 2030 than it was in 2019 for the median city in our study. In a severe scenario, demand falls by 38 percent in the most heavily affected city,” it said in a report entitled ‘The Impact of the Pandemic on Real Estate’.
A rare piece of good news for WeWork in the UK was a deal to let 20,000 sqft of office space at WeWork 2 Eastbourne Terrace in Paddington to tech unicorn Multiverse, the business founded by Tony Blair’s son Euan.
That site is one of 40 across the capital, and as well as the four Manchester sites and the Birmingham location WeWork UK also has spaces in Cambridge and Edinburgh.