Is Hybrid Working WeWork’s Saving Grace?
Recovering in a post-COVID world means that working from home has become, not only a preference but a right for many workers. The pandemic may have changed how we work but what does this mean for office space?
Adam Neuman, the former CEO of WeWork, dreamed to make working more about living and less about surviving. Offering baristas on every floor, the edgiest chairs and stools to perch on, floor to ceiling windows and table-football areas to unwind. WeWork offices were every startup’s dream. Sharing office space meant flexible commitment leases where cost-effective agreements could be achieved; businesses, large and small, leapt at the chance to become part of the WeWork bubble.
This bubble grew and grew; WeWork at its peak owned over 820 buildings in 120 cities. The sky was the limit as far as Neuman was concerned. Backed by the Softbank Group who invested north of $18.5bn in the company, Neuman made some arguably reckless business decisions.
When the company made an initial public offering (IPO) in 2019, Softbank’s investment backing meant WeWork was valued at $47bn. Yes – billion.
And then the bubble burst. After publicizing their data revealed grossly optimistic forecasts based on mediocre profits, confidence dwindled. Actually, confidence plummeted. WeWork reduced its valuation to $10bn in 2019. To kick a man when he’s down, COVID meant hundreds of companies cancelled their contracts with WeWork. In May 2020 Softbank valued WeWork at $2.9bn – 6% of the 2019 valuation!
This fall from grace also led the board to replace Neuman (after he received $1.5bn in shareholdings). Neuman has been criticized for running WeWork as if it was a trendy tech company that would change the world. In reality, WeWork is nothing more than a cold hard real estate business.
WeWork Employees, image via Zero Hedge.
Where is WeWork Now?
Under new CEO, Sandeep Mathrani, WeWork has seen a rise in its profitability. Pre-COVID, the average occupancy of the company’s office stood around 70% – due to COVID this dropped to 47%. Only recently, May 2021, has the first post-COVID rise been seen (up to 53%).
Things are looking up, WeWork is attempting a new IPO via a SPAC deal in 2021 with a much more sensible valuation of $9bn. But will workers really return to offices?
In Manhattan, where WeWork started its property empire, only 29% of workers are estimated to be back in the office by the end of July. The future looks bright as there is a hunger for the trendy office environment that WeWork offers – but can they hold in with all that uncertainty?
Hybrid Working & Hybrid Shirking
It seems like yes. WeWork offers flexibility in its contracts, allowing businesses to change their office requirements as they expand and contract. Many big corporates highlight they will probably never have 100% occupancy in their offices again. In offering low-commitment office space, WeWork may have just capitalized on hybrid working as the new norm. Read more about hybrid working here.
The pandemic has shone a light on the importance of work-life balance. The working exists alongside a healthy dose of hedonism. Flexible office space offering opportunities to relax are being increasingly valued. WeWork might just be on the right side of history.
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Header Image via Business Insider from Reuters.