Flexible office space provider WeWork closed one of its New York locations in a continued effort to decrease its real estate footprint, Bisnow reports. The company shut down its 86,000 square foot space at 25 Broadway as it looks to increase profitability through shrinking its national portfolio.
“WeWork has continued to optimize its global real estate portfolio as a part of the company’s plan to achieve profitability,” a WeWork spokesperson told Bisnow earlier this month.
The timing of the closure is woefully shy of the 20-year lease WeWork signed for the space in 2013. The company received a year of free rent and paid somewhere in the range of $30 and $40 per square foot. Still, the flexible office space provider decided now was the time to move on from this property where it assumed space on the ninth and tenth floors.
“With an abundance of supply in our markets, we have been able to right size our footprint while also ensuring our members can continue to access first-class flex office space,” the spokesperson said.
In July, WeWork Chief Executive Sandeep Mathrani told Bisnow that 85% of the company’s locations were still profitable. Mathrani also noted that WeWork was working with landlords of the non-profitable locations to find a solution that worked for both sides. The executive projected that WeWork should be profitable by the end of this year.
Despite WeWork being founded in New York and quickly earning the title of the city’s biggest private office tenant, the flexible office space provider has made numerous cuts to its Big Apple portfolio. WeWork also confirmed it will close down operations at five other New York locations. WeWork’s desire to shrink its footprint on its way to profitability isn’t limited to New York, however—the company also closed seven locations in Washington, DC, Bisnow reports.
What’s to come of the co-working industry?
WeWork’s recent office closings are not necessarily an indication of how the co-working space industry is doing overall. Sure some companies are struggling—Knotel recently filed for bankruptcy and Newmark is acquiring it, but there have been too many recent investments in the flex office space companies for anyone to think the COVID-19 pandemic and the rise of remote work has killed the industry off altogether. After all, Regus parent company IWG just acquired a major stake in The Wing, a women-focused co-working space company. Meanwhile, flexible office space provider The Yard announced it’s converting a New York City Marriott into a co-working space. Industrious is also looking to open more co-working spaces. It was just announced this week that CBRE has taken a 35% stake in Industrious also.
No company wants to invest in an industry it believes is hopeless, regardless of how much disposable resources it may have. Every story that breaks about a company either buying or searching for co-working space is an indicator that these offices will be in demand as the COVID-19 pandemic subsides. Perhaps one shouldn’t look at WeWork’s office closings as a sign of defeat, but rather as a way for it to remain in the game profitably.
Joe Dyton can be reached at email@example.com.