CoStar Column: Covid-19 and a forced revolution to how WeWork

The troubles possibly faced by WeWork, the shared office space company, were well documented long before the global impact of Covid-19 was felt. WeWork, unlike other shared office companies, tends to use a more inherently risky business model, taking long leases and carving them up into short-term flexible letting arrangements. Whilst some shared office companies take on geared leases, passing up a percentage of revenue, and thus sharing the risk and reward, WeWork is understood to have a larger holding of fixed rent leases. That means in good times they can scoop larger rewards, but that comes with bigger risk when the market turns bad. The company was forced to abandon its IPO last year, and on 1 April, its largest shareholder, SoftBank, walked away from purchasing $3bn of WeWork stock. SoftBank explained that the move was due to a number of conditions which WeWork had failed to fulfil. Those conditions included the existence of criminal and civil legal proceedings and a failure to roll up WeWork’s Asia joint venture.