This was published 4 years ago
Co-working crumbling: Start-ups abandon hot desking
By Emma Koehn
Australian start-ups are racing to exit agreements with co-working providers and battling global giant WeWork for fee relief as coronavirus kills the attraction of hot desking.
Independent Australian co-working spaces have been forced to shutter after their memberships dwindled to zero over the past two weeks.
Jodie and Erz Imam will close their coworking space Depo8 after demand dropped significantly in the wake of coronavirus. Credit: Joe Armao
Advice from global health authorities including the Australian government has been for citizens to work from home unless it is not possible to do so. This has left early stage businesses around the world negotiating with co-working spaces to either exit contracts or pause membership fees.
Melbourne entrepreneurs Jodie and Erz Imam made the difficult decision last week to close their co-working space Depo8 after going from 83 per cent capacity at the start of March to zero members once coronavirus conditions hit.
"We took the decision to jump straight away — we knew, we weren't coming out of this," Ms Imam said.
Wework's doors have stayed open across the globe throughout the coronavirus pandemic. Credit: Bloomberg
The founders are set to be out of pocket at least $100,000 after having to sell-off the 80 strong office fitout. The duo are in negotiations for a surrender of lease and have refunded all members their bonds.
Elsewhere, members at spaces including troubled co-working giant WeWork have complained that while conditions mean they cannot use spaces, getting out of membership fees has been tough.
WeWork suffered a blow last week when Japanese investor Softbank pulled out of a deal to buy $US 3 billion ($5 billion) in shares. The company is in conversations with landlords across its network to manage rents at a time when many of its members are seeking to exit.
The spaces themselves remain open for business, however, including at sites in Sydney and Melbourne.
Australian members are concerned they will be left out of pocket due because they don't feel comfortable using WeWork spaces.
One Sydney start-up founder, who spoke on the condition of anonymity, said their business would likely lose lose tens of thousands of dollars because WeWork would not engage with the company to alter its membership unless an annual retainer fee was forfeited.
"Our key concern is we’re paying for a very expensive office that we are not lawfully allowed to access," the founder said.
Commercial lawyer Richard Prangell said a number of his clients had approached him with concerns about co-working agreements. He believes there could be scope for them to exit these under the legal principle of "frustration of contract", because contracts cannot be fulfilled given start-ups have been told not to attend offices unless necessary.
"It's all new territory in that we haven't seen a pandemic, but a change in the law that renders performance illegal is a classic example of 'frustration'", he said.
A spokesperson for WeWork confirmed the sites continue to operate in Australia and provided a statement from the company's executive chairman, Marcelo Claure.
"WeWork is a service provider and we have an obligation to keep our buildings open. In the same way we expect certain businesses to remain open for us—whether it be a fulfillment centre to send us a package, a bank so we can handle finances, grocery stores and pharmacies to supply us our valued goods—we too have members counting on us to remain open," he said.