WeWork employees still don’t know what lies ahead of them, while landlords renting space to the company are being cautious and SoftBank’s CEO is embarrassed but hopeful.
It has now been two weeks since the news broke that Adam Neumann was stepping down from the role of CEO at WeWork, but the company’s employees, customers and landlords still have no idea what could be waiting down the line for them.
While major layoffs are expected at the company, the extent of what that could entail has not yet been revealed.
Last week, New York magazine reported that WeWork employees were concerned that having the company’s name on their CV could act as a “black mark” against them. Other employees are reported to be concerned after they used personal savings to buy stock options in the company.
WeWork’s new co-CEO Sebastian Gunningham was said to have warned employees that anyone who wasn’t interested in dealing with the transition ahead “should probably consider getting out”.
Speaking to the magazine’s Intelligencer section, one executive said: “Thousands of people who worked tirelessly, because there’s no other way to do it there, are going to end up screwed financially because they took lower income to have more equity that has disintegrated.”
On Monday (7 October), the Financial Times reported that it’s not just the WeWork employees who are anxious about what lies ahead, but also the landlords that work with the company. WeWork has offices in more than 280 locations, spread across 111 cities in 29 countries.
WeWork notably bought some of these properties outright and in recent years began to shift from leases to co-management deals. However, the company still rents a significant number of the properties that it uses to offer co-working spaces.
FT spoke to two landlords of large WeWork sites in London, who said that they will not sign new leases for the foreseeable future. The landlords are making contingency plans in the event of a disaster with the company.
One of the landlords told FT: “It would not be prudent for us to do anything [new] with them until we see how the new management will operate.”
In the UK in particular, WeWork has quite a significant presence. The Guardian reported that the business has 60 offices across the UK and is the second largest occupier of office space in London, behind the UK government.
The company has signed lease agreements for 344,000 sq metres of office space, which amounts to more than seven times the floorspace in London’s famous Gherkin tower in the financial district.
Mat Oakley, head of the UK and European commercial property research team at estate agent Savills, told the Guardian: “They’ve expanded at an exponential rate and that was probably too fast. Their occupancy rates are high and there’s definite demand for this but they have a lot of high fixed costs, regardless of whether each building is full or empty.”
Oakley said that this could have negative impacts on the perception of the serviced office industry. “A failure of this scale would draw into question the whole business model, rather unfairly. Aggressive expansion is not a new mistake.”
On Monday (7 October), one of WeWork’s high-profile investors expressed embarrassment about how events have been unfolding.
Masayoshi Son, CEO and founder of SoftBank, which has pumped billions of dollars into WeWork as well as Uber, told Japan’s Nikkei Business magazine that he is “embarrassed and impatient” about his bets on loss-making businesses.
“Looking at the growth of companies in the United States and China, there is a strong feeling that this is not enough,” he said.
According to Reuters, Son has been warning founders to “know your limit”. However, the SoftBank CEO said he does have hope for WeWork and Uber in the long term.
“Companies like WeWork and Uber are criticised for being in the red, but in 10 years they’ll be making substantial profits.”