WeWork will no longer be taking 45,500 sq ft in Worthington Group’s 125 Deansgate, after legal negotiations between the co-working operator and landlord stalled.
In November, Place North West reported that WeWork was under offer on the lower four floors of the 116,000 sq ft office, currently under construction in Manchester city centre.
However, it is understood that by December talks with Worthington had gone cold, as the developer was concerned that a letting to WeWork would not increase the office’s value enough to a future purchaser, particularly compared to a blue chip occupier. The developer is thought to be looking to achieve an ambitious yield when it sells the completed building.
When WeWork leases space it creates a special purpose vehicle for each location, to reduce the risk to the parent company. However, this means that as a tenant, WeWork isn’t seen to have the covenant strength of a well-established law firm. There has also been rising scepticism in the property market as to whether appetite for co-working space will continue to match WeWork’s rapid expansion.
In Manchester, WeWork has two sites open at No.1 Spinningfields and One St Peter’s Square, where it occupies 60,000 sq ft and 40,000 sq ft respectively, deals that were agreed in the summer and autumn of 2017.
There are also two further WeWork bases set to open in the city; in 65,000 sq ft at Dalton Place, owned by Tesco Pension Fund, and in 51,000 sq ft at Hypen on Mosley Street, owned by Boultbee Brooks and CBRE Global Investors. Both of these deals are still going ahead.
Even without the Deansgate letting, Manchester is set to see the highest number of WeWork locations outside of London. A source close to WeWork said the company was in talks to take further sites, and that “doors had opened” following the collapse negotiations with Worthington.
WeWork was approached for comment, and Worthington Group declined to comment. The agents at 125 Deansgate are Savills and Knight Frank; JLL advises WeWork.