[sarreph]

In my opinion the writing for a way out of this mess has been on the wall for a long time now, post-Covid. This is with the only viable, but still heavily under-utilized product they have left: hot-desking and community workspaces.

Having rented multiple dedicated offices from WeWork I can attest that the corridors are become more and more like a post-apocalyptic landscape as the tenants — no longer taking advantage of introductory rents — move out one after the other. Go to the hot-desking spaces floors and you’ll find it bustling and sometimes not even possible to get a seat somewhere.

Why they haven’t aggressively cut underperforming locations and consolidated more hot-desking space into the better buildings is beyond me. Especially in the current work environment where arrangements with companies are flexible and the line between home and work becomes ever blurred. It seems like the perfect base to start on to build a new offering for companies that can provide employees with hot-desks on a flexible basis.

[mirekrusin]

They probably enter into long term lease for the building they can’t get out overnight?

[sarreph]

Good point - goes to show it’s always easier to criticise behemoths like this from the outside.

However, I wager that they have had long enough to plan around this one - _surely_ there are a non-negligible amount of leases they can trade or sell on / do something with as most WeWork locations are in highly desirable spots.

[JumpCrisscross]

> they have had long enough to plan around this one

WeWork’s core model has always been borrowing long and lending short; they are inherently vulnerable to a sharp spike down in commercial rents.

Apart from financially hedging that, or penning fancy outs when they signed their leases, it’s tough to see how even prescience a few years ago could have saved them. And that’s amidst Silicon Valley’s attitude in 2021-22 that the Fed couldn’t—not wouldn’t, couldn’t—raise rates or else America would go bankrupt or some nonsense.

[mdorazio]

Commercial leases are usually 7 years. If they bought in during the go-go run in 2018-2019, they've still got years left. Breaking a commercial lease in good times is already very difficult (I was lucky to get out of one a year early in 2019 because I found someone to take it over that the landlord liked). And who would take over or sub the lease today? Everyone is trying to get out of their leases right now because office space is underutilized with WFH.

[sarreph]

Also good point. However, while commercial spaces in general are (as you say) underutilized, my gut feel (non-empirical here) from being in large cities is that there is somewhat of a boon for hot-desking / blurred-work-life-balance "office leisure spaces".

Without having your experience of breaking a commercial lease, I would imagine one avenue to explore would be trying to offload some of these leases to emerging companies doing what I refer to above.

[londons_explore]

Sure they could offload them (commercial leases are usually transferrable/sublettable),but if you offload them for pennies on the dollar, that looks really bad on the balance sheet.

Better to keep them and tell your shareholders that this is a temporary blip, and profits will be coming any day now...

[kryptiskt]

If I ran WeWork my evil plan would be to move to a franchise model, collect a franchise fee from each lucky winner of the franchisee stakes and transfer the leases to them. And then I would sit back and collect a modest fee based on revenue (say 10%) for the branding and the concept.

[rcme]

Isn’t this a microcosm of the broader story with commercial real estate? Values are down massively. Trying to break the lease is like realizing those losses for WeWork.

[orange_fritter]

It's a significant money investment to renovate a space for co-working. Also, if you move spaces, you will lose some customers to attrition. There's a lot of overhead... it's not like everyone just teleports to a different building.

[KaiserPro]

You're assuming that they:

a) have long term leases

b) paid a reasonable amount for them

c) those leases can be traded

d) those leases are actually worth enough to be useful.

[bratgpttamer]

I do recall hearing that this is/was precisely their business model: given that rent always* goes up (and never* down), lock in rates with a 10- or 20-year lease, wait for rent to increase for other people, [???], profit.

[vasco]

Rent inflation is built-in to every single real estate investment model ever. Even individuals getting a first property to rent out tend to model out rent increase when calculating yield over more than a few years.

[Aeolun]

Their dedicated office space is just absurdly expensive. I'd pay $2000/month for a 10sqm office when I can get a 20sqm office from the market for $1000/month. Of course the locations are not equivalent, but it's just not really relevant for those of us working remote anyway.

[hn_throwaway_99]

It's exactly this. Our company got a great, large dedicated office space during the peak of Covid for a pretty great deal. Note at the time it was still one of the most expensive options, but the location, amenities and quality of the office space made it worth it.

When it came time to renew they tried to more than double the rent. We then downsized to a space less than a fourth the original space - just a couple desks and a small meeting room. That worked out great - most employees are now firmly remote anyway, but we have a good space, and anyone can use our block of credits, so if we need to have a bunch of folks onsight for an in-person meeting we just book a large meeting room and it works great.

I think WeWork was horribly mismanaged by Neumann, but I still think they'd be in giant doodoo even if they had great management. The pandemic really fundamentally changed work patterns forever.

[smileysteve]

But $1000 a month seems cheap compared to an office manager?

That is, a dedicated employee for receiving, kitchen stocking, security management, and even utility management (how many novice office managers try cable Internet before buying fiber)

[Terretta]

Yes, and an office manager that doesn't have to be told what to do about anything, who actually manages workplace facilities, equipment, and operations fully autonomously, is likely to run between $5K and $10K a month, at least (more if salaried with benefits).

[Aeolun]

> But $1000 a month seems cheap compared to an office manager?

Only if you use $1000 worth of office manager every month.

[lordnacho]

> Go to the hot-desking spaces floors and you’ll find it bustling and sometimes not even possible to get a seat somewhere.

Weirdly I'm writing from a WeWork floor in central London that has about 3 people in a room sized for about 30. I've never seen it even half full, though I don't drop by very often.

Even the common areas have enough space to go sit in and have a meeting on demand.

The conference rooms are pretty busy however.

[evanelias]

Interesting. If companies are fleeing WeWork, it might explain a phenomenon that I've noticed over the past couple months: every cafe in my area has increasingly become a loud crowded hellscape of video chats, in-person meetings, phone calls, and groups working together for hours.

This is especially apparent on Tue/Wed/Thu, when previously cafes were recently less busy, due to these days commonly being in-office days for hybrid workers.