After growing to be the biggest tenant in cities across the U.S., the once Silicon Valley darling WeWork last month warned it could file for bankruptcy following years of losses.
The coworking giant, once valued at $40 billion, saw its stock price fall below $1 per share early this year, prompting it to file a going concern notice to the Securities and Exchange Commission (SEC) last month.
“Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern,” WeWork said in a filing with the SEC.
WeWork may be struggling, but plenty of other coworking companies are still thriving as renting shared workspace is significantly more affordable than leasing traditional office space in 96% of the cities analyzed by CoworkingCafe.
Coworking subscriptions cost less than half the price of an office lease in 17 U.S. cities, according to the analysis. In Santa Monica, California, for example, it costs $45,570 for 10 people to lease a 2,000-square-foot coworking space. But the cost for a comparable traditional office space is $120,977 per year.
“Workspace flexibility is becoming a hard requirement to stay in the game — especially for small and mid-sized companies,” according to the CoworkingCafe report. “The agility to dodge any sudden changes that might put work efficiency at risk is no longer just a nice-to-have.”
Before the global COVID-19 pandemic, coworking spaces were primarily used by freelancers and other contract employees. But post-COVID, businesses of all sizes are discovering their value as they grow or restructure and need flexibility in their office space.
Many companies also offer their employees coworking arrangements to help them diversify their routines and bridge the shortcomings of remote work.
Some businesses are working with their landlords to make their existing spaces more flexible, according to CBRE’s Spring 2023 U.S. Occupier Sentiment Survey.
Of the companies responding to the survey, 62% said they are either executing or exploring with their current landlords flexibility to traditional leases through large expansion and transaction options.
In addition to flexibility in traditional leases, more than half of survey respondents want access to shared building services and amenities such as meeting space, overflow space, daycare and fitness facilities.
And with office vacancy at a 30-year high of 18.2% in the second quarter, landlords are more likely to accommodate them.
Given the demand for flexible office space the CBRE survey found, the collapse of WeWork appears to be an anomaly.
“We believe WeWork’s challenges are largely specific to its business model that locked it into long-term lease commitments made prior to the pandemic while facing significant debt-service costs amid steeply rising interest rates,” CBRE’s report states.
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