We work CEO David Tolley, wrote a letter about the company’s next move, saying “The Company has tended to begin the process of agreement with landlords and real estate partners, about renegotiating almost all of its leases”. He further added a context that they expect to way out from ‘Un-fit and Under-performing locations globally’ We Work promises!
We Work, a global work space giant based in New York, which leases the buildings for work spaces to business corporate including national companies, startups and other business sublets. Though the company is delivering world-class co-working services and esteemed operational efficiency from ages, they seek unsustainable and unprofitable growth in recent years which is not blending into the current market structure.
During the period of pandemic, the world shifted to working from home concept, where the company faced immense challenges to sustain in the industry. Fortunately, post-pandemic, slowly the companies returned back to normal work life as, thus it occupies average office spaces. However the transformation happened, a few companies started to offer employees to work from home option, as WFH has its perks of reducing the overall expenses such as rental, operational costs and so on. Hence the declining demand for office spaces in real estate industry remained to continue. According to Forbes, the demand for office spaces will drop down to 13 percent less by 2030 and projected the demand will fall further by 38 percent in major cities. The scariest reality shattered the office space ventures into jerk and forced them to take several immediate actions to fix the trajectory.
Since We Work have taken several measures to cope up with these challenges and improve the footprint in real estate, they seek unprogressive hyper growth in recent period. Due to rise of remote work, the companies and partners slowly started to deny the office spaces, thus caused major drawback to work space market in real estate. The company reports that operational expenses are overflowing than the leasing liabilities and not meeting the current market conditions. As the company has been struggling in transforming the cost structure to strengthen the financial balance, finally now they announced the process of renegotiation of leasing in favorable terms with land lords. Additionally, they announced that they are going to exit from ‘Un-fit and Under-performing locations’ in order to invest that capital in other operational assets.
Followed by their warning statement of ‘Substantial doubt’ released few days back, which sounded an alarm about their ability to remain in business & operate, the renegotiation factor made their members and coworkers to turn around. The decision of renegotiating with land lords signifies the commitment of We Work’s support towards their members. By offering flexible terms and conditions, the company aims to align solutions to reshape the work force dynamics. They tend to fix the inflexible and high cost portfolio to serve their members with efficient and sustainable operative model. At the end, We Work CEO David Tolley promised by saying “We Work here to stay and will remain a trusted real estate partner in co-working industry”.
As the world navigates to resolve the uncertainties evolved by pandemic, the agreement of We Work’s renegotiation in terms of fixing the needs of their members remains extremely noticeable. Hope this trend of changing the business norms to give additional support and alternative to the users will disrupt the inconvenience in work space market.
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