One of the most fascinating trends of the past decade was the emergence of co-working spaces. Large co-working groups like Regus & WeWork, have become common place in almost every market. In fact, WeWork is still the largest occupier of office space in New York City and landlords have spent millions in capital to outfit their buildings for co-working space. WeWork’s rapid expansion was chronicled in almost every business and real estate publication. A 2019 IPO was shelved after investors balked after seeing a colossal valuation cut which led to its founder to be ousted in 2019. The company’s forecast seemed gloomy. Add a pandemic with changes to our work patterns and demise is seemingly inevitable. However, a new CEO has taken over to lead WeWork out of what seemed to be an unsurmountable hole.
This is the kind of turnaround that can inspire us during the pandemic. The new CEO is leading WeWork back from the brink. He is a seasoned real estate professional and I personally believe he will be successful. Why? Well, a couple of reasons. First, COVID-19 has hurt the office sector. Tenants will be looking to take advantage of less square feet as many workers continue to work remotely for at least a portion of their schedule. Second, WeWork will continue to innovate and become a market leader for the new office offering flexibility, safety and collaboration. These are trends that will inevitably appear in office buildings all over the country and the world, for that matter.
WeWork will be successful because of their flexible terms and ability to offer a variety of configurations in addition to innovations around safety. But WeWork’s success isn’t due to anything that can’t be replicated. Savvy landlords can and should implement some of the things that are making WeWork successful. By being proactive about safety, landlords can provide their tenants and prospective tenants the feeling of security. Simple things such as signage, antibacterial dispensers, and socially distant common areas will go a long way. On the leasing side, getting comfortable with shorter lease terms and pivoting to a leasing for occupancy strategy can give tenants the flexibility they need while also preserving cash flow. The sudden popularity of co-working spaces has shifted how tenants think about space and wise landlords will continue to incorporate these strategies into their business plans.
WeWork has been a fascinating story from the start. From their rapid rise to one of the largest single occupiers of office space in the United States to the botched IPO and subsequent recovery, it’s a story straight out of a movie. Now as we all face an unprecedented challenge with COVID-19, we anticipate the business model of WeWork to succeed and create a new mold for office leasing coming out of the pandemic.