WeWork Cuts Rental Fees by 10 Percent in the U.S.
WeWork started slashing the prices of its units — which range from private offices to just a desk — in November, and again in January, as the coronavirus pandemic continued to empty locations, according to data compiled by Bloomberg. Locations in New York saw fees cut by 15 to 20 percent.
A spokesperson for WeWork declined to comment.
Coworking companies have struggled during the pandemic as members worked from home, leading some operators to close locations or throw in the towel. Knotel recently filed for bankruptcy, with Newmark putting in a bid to acquire it, while Breather shuttered all of its locations.
And WeWork isn’t only cutting office prices during the pandemic. The average asking rent for all office space in Manhattan fell from $79.17 in January 2020 to $73.65 in January 2021, according to a report from Colliers International. Meanwhile, the amount of sublease space keeps increasing, which can further drive down the office rents in the market as sublets tend to be cheaper.
WeWork started to take steps to cut its huge cash burn pre-pandemic by closing underperforming locations and renegotiating leases with landlords, with the goal to reach profitability by the end of the year.
So far, the company reduced its cash burn nearly in half from a peak of $1.4 billion in the fourth quarter of 2019 to $571 million in the third quarter of last year, and cut its long-term lease liabilities by more than $1.5 billion, a source familiar with WeWork’s financials previously told Commercial Observer.
Despite the pain wrought by the pandemic, the coworking market is expected to rebound as workers return to the office with companies looking to add more flexibility to their office portfolio. While experts told CO they anticipate more operators to shutter, most think WeWork will survive.
“I think [WeWork] put themselves in a position that, once the world starts to reopen, that they will recover in a strong way,” Alexander Snyder, an analyst at CenterSquare Investment Management, who follows the flex office market, previously told CO.