WeWork filed for Chapter 11 bankruptcy protection on Monday, listing nearly $US19 billion in debts, according to Bloomberg. The coworking space, once the largest office space tenant in Manhattan, will keep existing offices open, according to its bankruptcy filing.
The flexible work company, led by cofounder Adam Neumann until 2019, has a cultish history speckled with forrays such as WeLive, co-living spaces that looked like bougie European hostels, and WeGrow, an education system for kindergarteners or “natural entrepreneurs.” The company bailed on rent payments during the pandemic, and it closed 40 offices in 2022. However, this won’t be the last time you hear about WeWork, as the company sees a bright future.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” said CEO David Tolley in WeWork’s bankruptcy filing. “We defined a new category of working, and these steps will enable us to remain the global leader in flexible work.”
WeWork plans to reject the leases of certain locations that are largely non-operational, and in which all affected members have already received notice. By dumping these unprofitable leases on expensive office buildings, WeWork hopes to lean out its portfolio and stay in business.
This bankruptcy filing was not unexpected. WeWork issued a warning to regulators in August that the company was hemorrhaging billions of dollars, and was at risk of bankruptcy. The company has over 700 global workspaces that are used by roughly 500,000 people.
WeWork paused its IPO in 2019 after concerns arose that it wasn’t the multi-billion dollar company it claimed to be. The company then had to lay off thousands and secure a billion-dollar bailout before it could go public.
The wider industry of commercial real estate is in dire straits and has not recovered since the Covid pandemic. Leasing activity is down roughly 35% from 2019 levels, according to The Messenger Monday, and the value of office properties in major working cities, like San Francisco, continues to plunge.