Rollercoaster Ride Continues for WeWork in Midst of Pandemic

WeWork, the New York based flexible office space firm, has seen its fortunes fall and then rise thanks to the coronavirus pandemic. When COVID-19 first struck, the company had still been reeling from its failed IPO, which was supposed to happen in September. As offices around the country shut down due to lockdown orders, WeWork started to see its clients drop like flies. Some opted to terminate their leases; others opted to simply not pay the rent. Now, with demand for flexible office space higher than ever, the company is reporting that it will be profitable again within a year.

In the wake of the initial surge of COVID-19, thousands of WeWorks’ tenants were affected. Almost immediately, the firm was inundated with calls and emails from companies seeking relief. At the start of April, WeWorks’ occupancy rate stood at just 64 percent; in September, it had topped 79 percent. Naturally, the company’s goal was to retain as many of its more than 662,000 members as possible. This entailed working with many of them by offering rent holidays or by renegotiating the terms of existing leases.

Despite these efforts, WeWorks lost lots of business as a direct result of COVID-19. Although specific figures are not available, the company surely lost millions of dollars in income as many of its members stopped paying. With its fleet suspended in March, Royal Caribbean, the cruise ship company, stopped paying for the space that it had been leasing in Miami. Many others followed suit across the country. Still, WeWorks managed to keep the majority of its 739 offices open outside of lockdown orders. However, in the early months of the pandemic, those offices remained largely empty – and it can be assumed that many tenants weren’t paying.

In anticipation of its IPO, which was scheduled for September, WeWorks had launched an aggressive expansion campaign last year. The company had signed hundreds of leases at the time that the IPO fell through, and more than 200 new locations were added during the second half of 2019. Ultimately, WeWorks had to be rescued by SoftBank, the Japanese firm and now majority owner. To handle not only the failed IPO but the hit that it experienced from COVID, WeWorks cut more than 8,000 jobs, sold off non-essential units and terminated leases at locations in Baltimore and NYC.

As Boston and the nation adjust to the COVID-afflicted world, businesses are reimagining how they will operate going forward. Ironically, this has resulted in increased demand for flexible office space – the exact thing that WeWorks specializes in. Between the efforts that the company took in reducing its workforce and shuttering some locations and the increased demand for flexible space, WeWorks has managed to rebound nicely. In fact, the company announced in July that it expects to see positive cashflow starting sometime in 2021 – a full year ahead of initial estimates. Ultimately, then, WeWorks may emerge from the coronavirus pandemic in a better position than when it started – a rare twist of good fortune.

In Boston, WeWorks has not made any major moves to shutter locations. With many companies seeking out flexible office space in the city – and many experimenting with satellite offices and more scalable solutions – it appears likely that WeWorks will continue to be a major force in the city’s commercial real estate market. The question is whether the company will expand its presence even more or hold off until things settle down further. Given the dearth of available office space in the city and the backlog of new construction that was caused by the moratorium on it earlier this year, chances are that WeWorks will have to wait before making any big moves in Boston.

What looked like dire times for the flexible office space firm appear to be waning. Could it be a sign of things to come for other businesses around Boston? That remains to be seen. However, the city’s real estate markets, both commercial and residential, continue to be afflicted by low inventory levels and soaring prices. In other words, it’s business as usual across the city – for now. Check back with Boston City Properties for updates regarding WeWorks and other commercial real estate news in the future.