The years-long decline of co-working office giant WeWork appears to be entering a new tumultuous stage, as the company has issued a warning to investors that it may not be able to continue its business.
“As a result of the Company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the Company’s ability to continue as a going concern,” reads the company’s 2023 second-quarter earnings report released this week.
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This ability to continue the business is contingent on whether they can improve liquidity and profitability over the next 12 months, including reducing rent and tenancy costs, increasing revenue by reducing the loss of members and increasing new sales, controlling expenses and limiting capital expenditures, and seeking additional capital through debt, equity securities, or asset sales.
WeWork saw revenues of US$844 million in the second quarter, representing an increase of 4% year-over-year, but a net loss of nearly US$400 million compared to US$635 million the second quarter of 2022.
Further contrast this to the third quarter of WeWork’s particularly turbulent year of pre-pandemic 2019, when the company reported 94% year-over-year revenue to US$934 million, but a loss of US$1.25 billion.
Ever since, the company has already focused on optimizing its vast real estate portfolio, reducing operating costs, and retaining and growing its membership.
In a statement addressing the most recent financial performance, WeWork interim CEO David Tolley blamed “excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
Semi-remote office work, as an enduring work-style change induced by the pandemic, has particularly thrown co-working office business models off course.
After the release of the second quarter’s financial performance, WeWork’s stock value fell by about 40% this week to only $0.13 per share.
From the high of the 2019 failed initial public offering, when WeWork’s US$47 billion valuation by investor Softbank crumbled, which led to the ousting of founder and CEO Adam Neumann, the company is now worth just US$270 million.
WeWork finally went public in October 2021 — the same month the company recorded its highest-ever stock price of over $13 per share.
WeWork reports that as of June 30, 2023, it has a worldwide real estate portfolio of 777 locations across 39 countries, which supports about 906,000 workstations and 653,000 physical memberships, equating to physical occupancy of 72%. Its average revenue per physical member was US$502 in the second quarter of 2023.
The company oversees 43 million sq ft of space across the globe, almost entirely through leases with commercial landlords. This includes over 18 million sq ft within Canada and the United States. Although they vary considerably, each WeWork location is typically over 40,000 sq ft in size.
Within Canada, WeWork currently has nearly two dozen locations in the Vancouver, Calgary, Toronto, and Montreal regions.
It has six locations within Metro Vancouver, including three locations in downtown Vancouver within the Bentall II and Bentall III towers of Bentall Centre, and 333 Seymour Street across from Waterfront Station. It has other locations at 2015 Main Street in the Main Alley tech cluster in Vancouver’s Mount Pleasant District, as well as Marine Gateway in South Vancouver and Station Square in the Metrotown district of Burnaby.
These existing Metro Vancouver locations have a combined total floor area of almost 700,000 sq ft.
In 2019, prior to WeWork’s crash that same year, the company announced plans to open three major new locations, including 1,200 desks in four office levels of the newly-built Tower 3 of The Amazing Brentwood mall, 54,000 sq ft with 1,200 desks at an older building at 1045 Howe Street in downtown Vancouver, and a 170,000 sq ft flagship location across 10 floors at the new B5 office tower in downtown Vancouver. These locations never opened.
WeWork also previously had a partnership with Hudson’s Bay, which would have led to the department store chain leasing the top floors of its downtown Vancouver flagship store for a co-working location. The 2017-announced plan never materialized, and Hudson’s Bay now has a proposal to undergo a major redevelopment of the building.
The company has a single Alberta location at Stephen Avenue Place in downtown Calgary.
In Toronto, WeWork has a total of 10 locations, with nine locations being within downtown and one in Liberty Village. This includes the June 2023 opening of WeWork’s newest location in the world at 357 Bay Street, occupying the entire 10-storey historic building with about 65,000 sq ft of space in Toronto’s financial core.
There are also four WeWork locations in downtown Montreal.
It has six locations in Seattle, including five in the city centre, and two locations in Portland.
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