WeWork rollout grinds to halt

WeWork rollout grinds to halt

22 November 2019

WeWork’s rapid expansion in Australia has ground to a halt with two significant office leasing deals between the co-working operator and two of the country’s biggest landlords now dead in the water, reports The Australian Financial Review.

WeWork was set to lock in one of its largest deals in Australia yet, with plans to take up 20,000 sqm across an entire tower at 55 Market Street in Sydney’s CBD, an office building managed by Mirvac on behalf of Chinese sovereign wealth fund China Investment Corporation.

But the deal according to the AFR, has fallen over and Mirvac must now head back to the drawing board to find another tenant to fill the vast space.

WeWork had been eyeing off ANZ’s former headquarters at 100 Queen Street in Melbourne with plans to take up as much as half the tower – around 15,000 sqm – but those negotiations have also fallen over, according to market sources.

The deals falling over are a sign that WeWork’s global problems are starting to hit the Australian market. It also supports the view by many landlords that they should be cautious when entering into lease agreements with the company.

As previously reported, WeWork is laying off 4000 employees to avoid bankruptcy — about 30 percent of the company’s staff. The New York Times reported this figure is closer to 6000, about half of its 12,5000 global workforce, to be laid off in the next five years.

WeWork has exploded in Australia in recent years, with 16 open co-working locations across the country, in Sydney, Brisbane, Melbourne and Perth.

Over the 2018 calendar year, the company’s future lease commitments in Australia had blown out to $920 million, up from $253 million a year earlier, with the almost billion-dollar debt not recognised as a liability on its balance sheet.

As a result of WeWork’s demise, many staff are jumping ship to other jobs as the co-working giant’s implosion gains pace.

For example, former head of research Daniel Davis, has moved from WeWork to Hassell.

“I’ve definitely got colleagues going to other architecture firms,” says Davis, hired by Australian architecture firm Hassell as its New York-based senior researcher.

“There are people going to companies like Google or Airbnb. A number of people are starting their own start-ups or architectural practices. It’s a real variety and diaspora of people going in different directions.”

“They’re a rich data source,” he says. “We had time to step back, take all different surveys sent out to however many companies and look at them longitudinally and pull the data together. It’s not just what it says about one company but what it says about all respondents over the last eight years.”