Shared office provider WeWork says it is “business as usual” for its Australian operations, even after the US parent filed for bankruptcy as debts mounted and office vacancies increased around the world.
The former high-flying New York-headquartered company operates in 15 Australian locations as part of its global portfolio spread across more than 30 countries.
It will now seek to terminate or renegotiate leases in an attempt to revive a company that promised to revolutionise office life by enticing workers into co-sharing arrangements with free coffee, mood lighting and beer-on-tap.
“Our commitment to Australia is unwavering as we continue to work collaboratively with our landlord partners, aiming to craft solutions that set all parties up for sustainable success,” a WeWork spokesperson said.
Last year, the Australian entity recorded a $211.2m loss after WeWork heavily downgraded the anticipated income it expected from its co-working spaces in Sydney, Melbourne, Perth and Brisbane.
It revalued the expected cashflow at one New South Wales site to $49.7m over the remainder of its lease, down from $83.4m previously.
While the bankruptcy proceedings are focused on WeWork’s North American operations, the company is expected to try to renegotiate office leases across its business, including the Australian unit that is ultimately owned by the US parent.
WeWork has a stated aim of revamping its cost structure after failing to build a profitable model.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” the WeWork chief executive, David Tolley, said in a statement on the company’s restructuring plans.
While it has shown signs of financial stress for years, WeWork was put under further pressure when some of its clients did not return to co-working spaces after setting up home offices during the pandemic.
By entering into bankruptcy, WeWork can try to address its massive debt load by negotiating more favourable leases or pulling out of burdensome arrangements altogether.
Currently, WeWork has future lease payments totalling more than $930.4m in Australia, according to accounts lodged for the calendar year 2022, with more than half of that due within five years.
Its Australian landlords, including GPT Group, Lendlease and Dexus, were contacted for comment. Office owners typically have bank guarantees in place from tenants like WeWork to cover rent for up to about 18 months.
Kai Riemer, a professor of information technology and organisation at the University of Sydney Business School, said WeWork’s troubles did not necessarily mean the broader co-working push would stall.
“WeWork has been grappling with some unique issues that stem from its original fast growth and heavy over-valuation, which has seen it take on large amounts of debt that seem to now have become unsustainable,” said Riemer, who added that the broader co-working sector suffered in the pandemic.
“As businesses look for more flexible solutions for its workers to work and meet in various places, co-working offers great potential.”
