This article is from the Australian Property Journal archive
WEWORK has won the backing of global commercial real estate agency Cushman & Wakefield, which will tip in $150 million to the co-working giant’s upcoming merger with special purpose acquisition company BowX Acquisition Corp that would value WeWork at $9 billion.
Major office landlords across the US had been preparing to welcome back their tenants en masse after the summer but this is likely to be pushed back as the Delta variant brings about a new spike in COVID cases. As businesses continually assess their real estate footprint, more than half of WeWork’s membership base was big enterprises as of the March quarter.
“COVID-19 has fundamentally changed the way people work, businesses and landlords have had to rethink their approach to workspace,” WeWork CEO Sandeep Mathrani said in a statement.
“Partnering with Cushman & Wakefield will combine WeWork’s industry-leading workplace experience management platform and hospitality-driven community teams with Cushman’s world-class global client and property portfolio to create a solution that helps both landlords and businesses meet the demand for flexible workplaces to fit the changing needs of today’s workforce.”
Data from property management company Kastle Systems last week showed the average occupancy rate in the 10 largest US cities was 34%.
Brett White, chief executive of Cushman & Wakefield, said the agreement would give its clients access to “flexible offerings, best-in-class technology and a seamless tenant experience” from WeWork.
Partnering with a real estate agency could be seen to give more weight to forecasts that co-working is a safer bet than the traditional office in a post-COVID world. Global firm CBRE recently took out a 35% stake in Industrious, and Newmark similarly acquired the bankrupt Knotel.
WeWork says its merger deal with BowX Acquisition Corp will provide a $1.3 billion cash infusion and make it a publicly-listed company. Valued at $47 billion just two years ago, WeWork was once the poster child of the co-working sector, which embraced flexible, tech-oriented working lifestyles and was seen as youthful, casual and then-niche alternative to traditional office models.
However, things went sour late in 2019 ahead of its planned IPO. It never turned a profit and gained a reputation for burning through cash, losing about $900 million in the first half of that year, and concerns over its governance and founder Adam Neumann’s leadership style ultimately led to a tepid reaction to its share offering.
Japenese tech giant SoftBank stepped in with $3 billion rescue package but bailed on the deal early last year because the coworking company did not meet certain conditions, and due to “multiple, new, and significant pending criminal and civil investigations”. WeWork’s value plunged to $2.7 billion.
Softbank is now the group’s majority owner, with a $1 billion commitment, and Mathrani has reportedly cut costs. WeWork now has $2 billion in liquid assets.
WeWork’s co-working rival IWG has just taken over 5,850 sqm formerly used by WeWork in Manhattan’s 401 Park Avenue South, and will operate a new venue under its Spaces brand.
