Potential CRE Impact Amid Uncertainty of WeWork’s Financial Turnaround
Many eyes within the commercial real estate market around the globe are focused on WeWork’s efforts for a financial turnaround as the flexible space provider looks to renegotiate or cancel leases to gain profitability. Existing challenges have intensified amid an uncertain economic outlook combined with ongoing remote and hybrid work schedules tempering demand for office space in major markets from London to New York to San Francisco. Back in August, the company stated in its earnings report that “there is ‘substantial doubt’ that the company can continue operating,” and that “its lease obligations continue to be the ‘primary challenge and obstacle’ to it cash flow.” There exists heightened concern among owners of Class B and Class C buildings since WeWork primarily leases within older buildings; and the possibility of a filing of Chapter 11 or Chapter 7 bankruptcy would give WeWork the right to terminate its leases which would not only add a significant amount of office vacancy to an already struggling market, but the ripple effect would impact lenders as well as many of WeWork’s tenants.