WeWork woes creates angst among landlords

A level of angst is starting to build surrounding the amount of office space that global shared workspace provider WeWork occupies in central city buildings, with some questioning how long it could be before landlords call in insolvency practitioners to seek advice.

The US group had been heading for a float on the New York Stock Exchange, valuing the company at $US47bn ($69bn), but the deal was pulled and thousands of job cuts are now on the cards, along with asset sales, as it continues bleeding cash.

Instead, WeWork is in early talks to raise money from private investors, according to the Wall Street Journal.

Owners and developers have been welcoming WeWork into their buildings for the cachet the brand brings and have worked to secure other co-working tenants or to set up their own co-working brands.

But now, some fears exist about its ability to pay rents in some of Australia’s top commercial real estate at a time when its ability to sublet its own space is questionable.

Its Australian subsidiary posted a $7.2m loss for 2018, according to accounts, and its lease commitments in that year were $920m, about a third of which was due within five years.

Globally, the company’s losses hit $US1.6bn in 2018 and it now needs almost US$3bn — the amount it wanted to raise in its IPO — so that it can retire its debt by the end of the year.

Among high-profile landlords that count WeWork as tenants are Lendlease, GPT and Dexus.

Dexus has the US-based group as a tenant in its 5 Martin Place, Sydney building and it occupies about 8000sq m of space in its building at 100 Harris Street, in Sydney’s Pyrmont.

However, WeWork only consists of 0.16 per cent of Dexus’s entire portfolio income and both sites where it is located are operating in excess of 95 per cent occupancy.

WeWork has expanded rapidly internationally, with 836 locations internationally. In Australia, it is thought to have a presence in as many as 20 buildings.

Co-working operators absorb about 20 per cent of Australia’s office space.

Some believe the concern about WeWork has been overplayed and that its initial public offering was simply mispriced.