The office space company WeWork filed for bankruptcy this week. But it isn’t the first time the company has been in difficult financial straits. FT Edit asked Elaine Moore, who has followed the co-working company for years, to give us her inside take.
WeWork’s spectacular life cycle spans a $47bn valuation, collapse, revival and now bankruptcy. True to form, the office leasing company is spinning its latest failure as an opportunity.
The US company’s original idea of turning offices into attractive, appealing spaces was a good one. Why should workplaces have grim lighting and boring grey carpets? In the 2010s, it tore through cities, signing eye-catching deals. But its ambition to be a tech company never rang true. What WeWork called a physical social network was really just a desk leasing business.
That’s why I wrote a story in 2018 questioning the company’s valuation. It made no sense that WeWork should be considered a completely new sort of company when European firm IWG has been providing something very similar since the 1990s.
Yes, WeWork was cooler but its losses were breathtaking. A year later, its botched attempt at an initial public offering led to the exit of founder Adam Neumann and a more sober company emerged. However, the basic problem of the business remained. WeWork entered into expensive long leases with building owners, refurbished the space, then offered it to tenants on short-term leases. The mismatch became difficult to manage when desks went empty, as they did during the pandemic.
On Monday, WeWork filed for Chapter 11 bankruptcy protection. The company has negotiated with many of its biggest creditors. It is time, says new chief executive David Tolley, to “pull the future forward”.
Post-bankruptcy we will find out if WeWork’s third iteration can make money. It could sign shorter leases, raise member prices and jettison a big chunk of its US portfolio, leaving international deals intact. Offering flexible office space can be a viable business. After all, IWG has been doing it for more than three decades.
Elaine Moore is deputy editor of Lex, the FT’s business and finance column
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Malcolm Moore (@malcolmmoore)
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