The beleaguered co-working firm has instructed Knight Frank to review its five regional offices, as well as those in London, Birmingham and Edinburgh as part of a cost-cutting drive, sparking uncertainty as to their future.
David Porter, head of Knight Frank’s Manchester office, told Place North West: “We have been appointed to review the business and overall revenue versus cost [of the offices]. WeWork is looking for opportunities to save costs.”
The review is in the very early stages, Porter added, and while WeWork’s operations were struggling globally before the Covid-19 outbreak, “logic dictates that the current pandemic hasn’t helped”, he said.
WeWork generally leases, rather than owns, the properties it occupies, and all of its North West co-working spaces are in Manchester. They are:
- 1 St Peter’s Square – 40,000 sq ft
- The Hanover Building – 91,000 sq ft
- Hyphen on Mosley Street – 51,000 sq ft
- Dalton Place on John Dalton Street – 65,000 sq ft
- No1 Spinningfields – 60,000 sq ft
It is not known at this point whether WeWork will attempt to exit any of the leases.
The US-headquartered flexible office provider has launched a review of its entire European portfolio totalling 140 sites, with property consultancy JLL also appointed to the job.
The business, founded in 2010 by Adam and Rebekah Neumann and Miguel McKelvey, has been mired in controversy in recent years, and the review of its co-working sites is the latest in its strategy to cut costs after the company announced plans last November to lay off 2,400 staff globally to plug a financial black hole.
WeWork reportedly lost $1.25bn in the third quarter last year, and Neumann resigned as chief executive last September the week before the company pulled the plug on plans to sell its shares on the stock market. WeWork’s valuation fell from $47bn to around $12bn between January and September 2019.
Earlier this month, the company announced plans to sue its majority stakeholder, Japanese investment firm SoftBank, for backing out of a rescue agreement to buy $3bn of its shares.
One source with knowledge of WeWork’s North West sites described the firm as a “basket case” and said it would most likely try and exit some leases as a result of the review. “I think logic would dictate that they would come out of some space – they have got too much,” the source said.
A spokesperson for WeWork said: “WeWork believes in the long-term prospects of our locations and our relationships with landlords. As part of our plan to seek profitable growth, we are conducting an in-depth review of operations and assets globally in order to rightsize the business and optimise our real estate portfolio.”
Knight Frank’s Porter said he did not know at this stage whether the firm would exit any of its leases in Manchester, or elsewhere.
“Short-term I think some of the flexible working providers could see a bit of a bounce as companies look to take shorter term leases,” the agent said.
“I’m sure some of them are having a difficult time at the moment, but when we do start getting back to work I expect them to [see increased] interest due to uncertainty going forward. If [companies] aren’t certain about how the land lies, it makes sense to not take longer financial commitments.”
However, the agent admitted that hygiene concerns over sharing space and hotdesking might deter some occupiers from promoting flexible working practices.
Lettings agents for WeWork’s Manchester sites include JLL, OBI Property, Savills, Avison Young and Cushman & Wakefield