Snapshots

Most markets have marginal exposure to WeWork

August 16, 2023

Contributors:

WeWork’s SEC disclosure on August 8 that “substantial doubt exists about the company's ability to continue as a going concern” was not a surprise for the market and simply reinforces the path the company has been taking over the past several years to restructure its portfolio and reduce costs.

Flexible space providers have generally remained defensive since the onset of the pandemic: despite averaging 2.7 million s.f. of quarterly gross leasing from 2016-2019, flex providers have averaged just 720,000 s.f. quarterly since 2020, and have not exceeded one million s.f. of leasing in a post-pandemic quarter.

WeWork’s exceptionally rapid expansion in the years leading up to the pandemic left the company especially vulnerable to office market disruptions relative to other flexible office providers: at the end of 2017, Regus occupied about 10% more space than WeWork nationally, but by the end of 2019 WeWork had grown to occupy almost twice the footprint of Regus in the U.S.

In total, WeWork occupies less than 1% of U.S. office inventory. Although there are pockets of high exposure in markets including NYC, Seattle, San Francisco and DC, the company’s performance does not pose a material or systemic threat to the overall market.

Net effective office rents have increased since the pandemic in most major CBDs

Sun Belt markets are exceeding 98% of pre-pandemic office leasing volume over the past six months

In-office policies drive stronger stock market performance