WeWork is poised to transform into a smaller—and possibly more appropriately sized—enterprise. After a final hearing on its bankruptcy plan Thursday morning, the coworking trailblazer will operate with fewer venues, a fresh injection of funds, and $4 billion in debt erased from its records.
In a crowded courtroom in Newark, New Jersey, Judge John Sherwood sanctioned WeWork’s restructuring scheme. WeWork anticipates emerging from bankruptcy by mid-June. The plan also thwarted an attempt by Adam Neumann, WeWork’s controversial founder, who aimed to repurchase the company he had established before being famously ejected.
WeWork’s clean slate will coincide with a new era of work, one where office staff have resisted the idea of returning to offices full-time; by late 2023, nearly 20 percent of office space in the US remained unoccupied. Nonetheless, employees are also facing increased feelings of solitude, a challenge that coworking firms argue they can tackle by fostering community. WeWork’s revival serves as a trial for the future prospects of coworking.
“WeWork still holds confidence in this as a sustainable business model,” states Sarah Foss, the global head of legal and restructuring at Debtwire, a financial services firm. “They are transitioning into a much more efficient operation.”
WeWork filed for bankruptcy in November. Plagued by exorbitant interest rates and the Covid-19 pandemic, which triggered a surge in remote work, it found itself burdened with numerous leases and expansive hot desks and flexible office spaces that remained unoccupied. By 2023, lease expenses accounted for two-thirds of its operational costs.
WeWork had amassed over 500 global locations before entering bankruptcy, and moving forward, will manage around 330 WeWorks, approximately half of which will be situated in the US and Canada. This move is expected to spare WeWork about $12 billion in rental obligations, halving its rental costs based on the company’s assessments. WeWork’s strategy involves amending or taking on numerous leases, as well as terminating or negotiating exits from roughly 150 others. The focus is on reducing its presence in regions where it had excessive capacity, whether from occupying too many floors within the same edifice or having multiple sites in close proximity.
Many of these adjustments are part of its Chapter 11 bankruptcy declarations, but venues outside of the US and Canada are not included in this package. In numerous other nations, WeWork has cooperated with landlords to renegotiate several of its leases, including those in Singapore, Kuala Lumpur, Bangkok, Ho Chi Minh City, Jakarta, Manila, and Paris.
Throughout the process, WeWork approached hundreds of landlords to discuss revised lease terms or exits from properties. Bankruptcy enables companies to renegotiate and outright reject leases, but the current challenges facing office landlords have put WeWork in a favorable position to negotiate improved conditions to remain in operation. “They possess the upper hand, recognizing the unfavorable conditions for landlords,” affirms Eric Haber, counsel at Wharton Property Advisors, an advisory firm in New York City specializing in office leasing. Now, a more streamlined WeWork aims for a “simplified structure where they aspire to generate profits, albeit with very optimistic forecasts,” according to Haber. “Even with this significantly improved setup, they must still deliver on their plans.”
