The demise of WeWork, once valued at $47 billion, has thrown the future of coworking into uncertainty as the global giant recently filed for Chapter 11 bankruptcy. With its share price plummeting, WeWork is closing offices globally, marking a spectacular fall from its peak.
WeWork’s downfall is attributed to its real estate model, holding nearly $19 billion in debt nearly 800 locations globally, relying on long-term leases and direct collection of membership fees. The pandemic exacerbated the situation as members canceled subscriptions, disrupting WeWork’s cash flow.
As WeWork grapples with bankruptcy, its failure might open doors for other coworking providers. Regus, operating for 35 years, is among the established players with a global network spanning 4,000 workspaces in 120 countries. Coworking companies like Regus and Serendipity Labs are adapting to changing preferences, setting up spaces in suburbs and hyperlocal areas.
Despite WeWork’s high-profile challenges, coworking continues to grow, driven by the changing dynamics of remote work. The industry’s resilience and potential for growth are evident as coworking spaces become integral to hybrid work strategies, offering a blend of flexibility and community.
What will happen to current WeWork members?
As WeWork faces bankruptcy, the fate of its thousands of members is a concern. WeWork members, ranging from freelancers to remote workers to large organizations, are likely to experience disruptions in their workspace arrangements at some point.
For those in locations slated for closure, the immediate challenge involves finding alternative office spaces that cater to their specific needs and preferences.
WeWork has assured that some locations will remain open, but the uncertainty surrounding the company’s future may prompt members to explore more stable alternatives. Members heavily reliant on WeWork’s unique community-centric atmosphere may find it challenging to replicate the same experience elsewhere.
In the aftermath of WeWork’s downfall, the cohesiveness of its global network may fray, impacting members accustomed to a consistent experience across various locations. The flexibility and convenience that drew members to WeWork may be compromised during this transition period.
However, the coworking industry as a whole offers a myriad of options. Members may choose to migrate to other well-established coworking providers, such as Regus or Serendipity Labs, which have demonstrated stability over the years. Additionally, some members might opt for local coworking spaces or explore hybrid models that include a mix of remote work and occasional office use.
There’s also a very good chance that another company will acquire WeWork’s assets and take over the business. How much will change is up in the air. If you’re one of WeWork’s All-Access members, you should pay attention to the proceedings and closures so you don’t end up paying your membership fee at the beginning of the month only to find out your WeWork location is one of those that might end up closing in the middle of the month.
Another challenge for WeWork members lies in navigating this period of uncertainty and swiftly identifying affordable alternative coworking solutions that align with their work preferences and logistical requirements. The impact on WeWork members will largely depend on how effectively they can transition from WeWork’s network to alternative coworking spaces amid the evolving landscape of flexible work arrangements.
Looking at another coworking bankruptcy
One notable example of a company in the coworking and flexible office space industry facing bankruptcy is the case of Knotel. In January 2021, Knotel filed for Chapter 11 bankruptcy, citing the economic challenges brought about by the COVID-19 pandemic. Knotel, similar to WeWork, provided flexible office solutions to businesses of various sizes.
Following the bankruptcy filing, Knotel underwent a restructuring process, which involved shedding unprofitable locations and renegotiating leases. In March 2021, Newmark Group Inc. acquired Knotel’s assets and certain liabilities, allowing Knotel to emerge from bankruptcy with a more streamlined business model. However, the restructuring involved significant changes, and Knotel’s presence in the flexible office market transformed under new ownership.
Another example is the bankruptcy of Regus Group Limited, one of the pioneers in the coworking industry. In 2003, Regus filed for bankruptcy protection in the United States after the burst of the dot-com bubble, which significantly impacted its business. During the bankruptcy proceedings, Regus underwent a substantial restructuring and downsizing.
Regus successfully emerged from bankruptcy and continued its operations, adapting its business model to remain a key player in the flexible office space sector. The company rebranded as IWG plc (International Workplace Group) in 2016 and expanded its presence globally. IWG currently operates various brands, including Regus, Spaces, and Signature by Regus.
These apple-to-apple examples illustrate that while bankruptcy can be a challenging and transformative process for coworking companies, it does not necessarily mean the end of their existence. Successful restructuring, acquisition, or adaptation of business models have allowed some companies to navigate through bankruptcy and continue operating in the evolving landscape of flexible workspaces. The timelines for recovery and re-emergence can vary, depending on factors such as the extent of financial restructuring, market conditions, and strategic decisions made during the bankruptcy process.
CoWorkign Here to Stay
Despite WeWork’s challenges, experts believe the coworking industry will persist and even thrive as other players step in to seize the opportunity. These experts contend that WeWork’s failure won’t disrupt the coworking sector significantly due to the unique nature of its problems. Unlike WeWork’s model, successful coworking providers often collaborate with commercial landlords, sharing amenities for a flat fee or profit share, minimizing risk.
WeWork’s bankruptcy might be a setback, but it won’t spell the end of coworking. The demand for flexible workspaces is increasing, with established and emerging players adapting to evolving work preferences. The demise of WeWork may well pave the way for a new chapter in the coworking industry’s evolution.