According to a story in The Australian, the collapse of the American co-working giant WeWork has forced significant lease agreements to be renegotiated in Australia.
Large players in the local property management industry are looking for ways to expand the scope of their flexible workspace offerings in the wake of WeWork’s Chapter 11 bankruptcy filing in the US.
The demise of WeWork has further cast doubt on the future of the co-working industry, which is already troubled by the epidemic and lengthy rental agreements.
The co-working leasing model that WeWork and its global equivalents have been using typically consists of long-term head leases with shorter-term sublets.
However, while WeWork reviews its leasing tactics and reduces costs, Australia’s largest office landlords, including Dexus, Lendlease, GPT, Charter Hall, ISPT, and Centuria, are thinking about improving their flexible workspace options.
This move toward landlord-driven workspaces, according to Laura Dawson, general manager of Urban Collective, has gained momentum, especially in the past year.
“Interesting times for our business,” she remarked. “WeWork’s issues are practically evidence that we are moving in the right direction; we are a landlord-owned company.”
Following a $12 million investment by the owner, JX Capital, Urban Collective opened three levels in October in the Neutral Bay lifestyle section of the Big Bear Shopping Centre in Sydney.
Over fifty new members have joined, which, as Dawson stated, “seems to be the direction things are moving.”
Particularly in the past 12 months, a lot of these landlord flexible space models have emerged.
Compared to the sublease arrangement, “tenants have an additional level of security,” she continued.
WeWork maintains its commitment to its Australian operations, which have been in lengthy lease negotiations with local landlords, in spite of the Chapter 11 proceedings.
As things stand, WeWork’s footprint in Australia has shrunk as a result of the closing of many facilities and continuing discussions to shorten leases in desirable areas including Sydney’s Daramu House and Perth’s Central Park Tower.
The COVID-19 epidemic and the increase in remote work have caused severe disruptions to the flexible workspace industry, resulting in the closure of companies like Victory Offices.
Nevertheless, some believe that there has been “too much scaremongering” about WeWork’s issues. One such person is David Press, the founder and director of RiskTalk, whose office is in WeWork’s Central Park skyscraper in Perth.
“I’ve received emails indicating that space is available for WeWork members,” he stated.
“It started around a week ago, when the WeWork bankruptcy was made public.”
WeWork Announces Office Closures Globally as Part of Restructuring Plan
According to the BBC, the embattled office-sharing company WeWork will begin to close some of its locations worldwide.
The business’s shares have dropped after it was reported that it may file for bankruptcy as early as next week. The company was previously valued at $47 billion (£38.6 billion).
WeWork declined to say how many of its UK locations might close.
It did, however, announce that it would shutter a building in central London near Blackfriars station.
The corporation described the action as a component of “our previously-announced strategy to improve liquidity and strengthen our balance sheet.”
Employees of WeWork at the Southbank building in London told the BBC that they received an email from the firm informing them that it was liquidating “unprofitable” locations.
They said that WeWork had promised to offer them “alternative workplace solutions” and that they had been instructed to vacate the property by November 30.
It occurs while the company is having financial difficulties. It informed the US banking authority on Tuesday that it had reached a temporary agreement with some of its creditors to defer payment of part of its debt.
According to information obtained by the BBC, the firm will now be trying to renegotiate many of its leases—not only in the UK but all around the world—as it attempts to resolve issues brought on by its rapid development, rising interest rates, botched effort to offer shares to the public, and co-founder’s departure.
WeWork stated in a statement to the BBC that it was “fully committed” to the UK and Ireland, but it would not comment on rumors that it was about to file for Chapter 11 bankruptcy in the US.
The company operated more than 700 outlets in 39 countries as of the end of June.
Since its first effort to sell shares on the public market failed in 2019 owing to worries about its debts, losses, and management, the New York-based company has been having difficulties.
Adam Neumann, the company’s creator, resigned as CEO a week before the business announced that its share sale had been called off.
Reviewing his leadership had “become a significant distraction,” according to the company.
The epidemic struck a few months after the listing fiasco, igniting a revolution in remote work and bringing WeWork under fire from disgruntled residents.
However, the business continued to run as executives trimmed positions, canceled or changed hundreds of leases, and sold off certain firms in an attempt to stop the company’s losses before its cash flow ran out.
In 2021, WeWork eventually went public on the New York Stock Exchange, trading at a far lower price than anticipated.
Tens of billions of dollars have been invested in WeWork by the Japanese giant SoftBank, despite the company’s continuous losses.
In the past year, the company’s share price has dropped by about 99%.
WeWork expressed “substantial doubt” in August regarding its capacity to carry on with business as usual.
In a statement at the time, the business mentioned that it was facing difficulties such as weaker demand and a “difficult” operating climate.