The leading global flexible space provider, WeWork, has announced plans to exit around 40 locations in the United States consisting of around 41,000 workstations.
WeWork Closing About 40 Locations in the US
The exits are focused in what the firm cite as ‘underperforming locations’, and the majority will be happening during November. The intent of the closures is to reduce rent, tenancy and building operating expenses, which WeWork expect to make up for the reduction in top-line revenue.
The action comes after WeWork reported more losses during the third quarter of this year, despite a positive year-on-year increase. Once fully implemented, the closures should contribute around $140 million to WeWork’s annual adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
What is WeWork?
The company provides co-working spaces for businesses and freelancers, including physical and virtual shared spaces. Headquartered in New York City, the company operated 19.8 million square feet in the United States at the beginning of this year, and boasted 756 locations across 38 countries around the world.
Notable WeWork spaces include multiple skyscrapers around Manhattan, as well as on Seventh Avenue in Seattle, Constellation Place in Los Angeles and the Salesforce Tower in San Francisco.
While the amount of workstations in the United States is shrinking significantly, WeWork are still expanding around the globe. This year the company has already secured traditional leases for over 20 new locations in other countries, which will comprise of around 18,000 workstations.
What WeWork Closures Mean for Businesses and Freelancers
At the time of writing, WeWork has yet to announce which locations will be closed as part of their cost-cutting exercise. All we know at the moment is that WeWork Chairman and Chief Executive Sandeep Mathrani described them as locations ‘that don’t meet our design criteria, have obsolescence or there’s an oversupply in the market’.
Some clarity on which locations will be closing will need to be forthcoming soon as many businesses and freelancers rely on their co-working spaces to conduct their daily operations. There may be a need to adopt a work-from-home strategy until a new co-working space can be acquired.
Businesses who suspect their location may be at risk will be wise to start planning a move now, so they are prepared should the axe fall.
WeWork ‘Leveraging All the Tools’
Mathrani also put a positive spin on WeWork’s third quarter financials, saying: “Our third quarter results illustrate how our disciplined and strategic approach to transforming our business and delivering holistic solutions for a new world of work are paying off. The long-term value of flexibility is clear and we remain focused on strengthening our business while navigating a volatile macroeconomic environment. As evidenced by our growth in revenue, reduced costs, optimized portfolio and reinforced balance sheet, we are leveraging all the tools at our disposal to continue executing against our goals.”
WeWork’s revenue for the third quarter reached $817 million, which is a year-on-year increase of 24%, hence Mathrani’s reference to revenue growth. However, the firm’s net loss was $629 million, which includes around $430 million related to non-cash expenses.
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I’m surprised it took them this long since remote work has become entrenched and employees seem to prefer it. But I also realize they were in some pretty long-term leases, so that may have been the issue.