Doubt over the future of shared office space specialists WeWork presents a further challenges for a Dublin office market already contending with the global tech slowdown and other factors this year. But commercial property industry experts believe some of the co-working business’s landlords are more likely to be affected than others.
Shares in the US company plummeted as much as 36 per cent in extended trading on Wednesday after it expressed “substantial doubt” about its ability to continue operating. The company cited sustained losses and cancelled memberships to its office spaces amid a slow post-pandemic return to workplaces in major urban centres.
The business, which takes up long-term office leases from landlords before renting out space on a short-term basis, will focus over the next 12 months on reducing rental costs, negotiating more favourable leases, increasing revenue and raising capital, WeWork said in a statement Tuesday.
WeWork, which went public in 2021, is one of the biggest individual tenants in Dublin. It operates at four locations, although that is down from its peak in 2019.
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Among other locations, it is the anchor tenant at the 11,148sq m (120,000 sq ft) former Central Bank of Ireland building on Dame Street, now known as Central Plaza, as well as the 9,920sq m (100,000 sq ft) Dublin Landings 2 building in the docklands. In addition, it has locations at Harcourt Road and the Charlemont Exchange near the Grand Canal.
Hypothetically, if WeWork were to file for bankruptcy in the US, industry experts said that, in many cases, its landlords will be able to take on the company’s existing tenant portfolio for a given property as their own. However, this is not the case at Central Plaza where WeWork is expected next month to begin fitting out the space it has leased from international property investment firm, Hines.
Hines declined to comment on WeWork’s announcement and there has been no suggestion that the fit-out will be paused or halted. However, one industry figure said Hines could be in a more precarious negotiating position than other WeWork landlords because the co-working company has not yet filled out its list of tenants at Central Plaza.
Shane Duffy, Dublin office agency director at Savills Ireland, said office landlords will have been well aware of the risks associated with leasing to WeWork.
“It always comes with a health warning from a landlord perspective when you engage with WeWork on a lease,” he said. “I don’t think this is anything that we didn’t probably already expect across the industry.”
By and large, WeWork has performed “remarkably well” in Dublin, Mr Duffy said, with the capital frequently cited along with New York as its best performing market. But the impending exodus of social media firm TikTok, which will move from WeWork’s Harcourt Street and Charlemont space to new offices in the docklands later this year, presents issues. “What void that leaves will be questionable and then who will replace that is another question that needs to be answered,” Mr Duffy said.
WeWork’s warning on Thursday comes mere months after it struck a deal with some of its biggest creditors and its majority owner SoftBank to cut its debt load by about $1.5 billion (€1.35 billion) and extend other maturities. – Additional reporting: Bloomberg/The Financial Times Limited 2023
