- WeWork was known for huge coworking spaces with amenities such as climbing walls and swimming pools.
- Jamie Hodari, the CEO of Industrious, said WeWork saddled the company with big liabilities.
- Once valued at $47 billion, WeWork has declared bankruptcy after years of financial difficulties.
WeWork’s collapse has likely ended the era of enormous coworking spaces filled with amenities including climbing walls, live DJs, and swimming pools.
Jamie Hodari, the CEO of Industrious, another flexible-workplace company, told Insider that while many WeWork locations will simply change hands following the company’s bankruptcy, the huge office blocks will become a thing of the past — and the cost of renting them likely contributed to the company’s downfall.
WeWork filed for bankruptcy on Monday after years of financial problems. The company has cut locations and renegotiated leases in recent years, but still had a real estate portfolio that spanned 777 locations as of June 30.
In “the vast majority of situations, the assets simply change flags — another provider will come in and run the space or the landlord will run it themselves,” Hodari told Insider.
But he added that the “really enormous WeWork spaces, the 300,000 to 400,000 square foot WeWorks, those are simply too large,” for other companies to take on.
“They’re the only provider in the sector that ever took spaces that large,” he said.
To Hodari, leasing these huge office buildings in their entirety was a major flaw in WeWork’s strategy during its high-spending heyday, saddling the company with significant liabilities.
“I think the extremely large spaces are probably not going to be viable moving forward, and the sheer scale of their liabilities overall, are a symptom of a go-go era where people were running companies for revenue growth rather than with an eye to profitability,” he said.
“Lots of companies, WeWork included, made decisions that spiked revenue in the short run, but probably weren’t prudent in the long run,” he added.
Luxurious coworking spaces may be a thing of the past
Huge coworking spaces with yoga rooms, beer taps, and swimming pools were the hallmark of WeWork’s operation at its height.
Briggs Elwell, a cofounder and the CEO of the real-estate-finance company RLTY Capital, told Insider that as impressive as these locations were, they were not helpful for the company as it attempted to become profitable.
“If you looked at the financials of WeWork even before this downfall, back in the days of Neumann, the reality is that it was pretty clear that a lot of those luxuries were actually the differentiating factor between profitability and not,” he said. Adam Neumann was a cofounder and the former CEO of WeWork.
“The reality is regrettably that you’re probably not going to have as nice a finish in the future,” Elwell added. “I think you’re going to see a leaner product.”
Hodari told Insider that Industrious, which has over 165 coworking locations globally, could take over a few WeWork sites.
But he said the company would not be able to take on WeWork’s largest office spaces in their entirety, and that these coworking spaces will likely vanish from city centers as companies become unable to afford them and landlords become more reluctant to rent out entire buildings for flexible working.
“If someone like Industrious came to manage a space like that, we would probably insist on taking one-third to half of it, and then the landlord would need to figure out what to do with the other half,” he said.
Once valued at $47 billion, WeWork has had a dramatic fall from grace since its failed IPO in 2019. With a sizeable presence in many city centers, experts have warned that its collapse could have dire consequences for commercial real estate.
Hodari said that, despite WeWork’s implosion, the broader coworking industry is healthy and that companies seeking flexible working arrangements have boosted the industry as employees have increasingly embraced hybrid working.
“I think the chaos of WeWork in its really dramatic years was not good for the sector. It was not good for the reputation of the sector,” he said.
“My hope is that this bankruptcy is the end of an era, that it helps get rid of all the noise around WeWork so people can focus on an industry that is really moving forward, versus losing sight of that in all of the WeWork turmoil,” he added.
WeWork did not immediately respond to a request for comment from Insider.
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