WeWork has hit the lowest ebb in its 13 year history - just at the time when the Irish office market needs its business model most, writes Adam Maguire.
With this week's filing for bankruptcy protection, WeWork has cemented its place in Silicon Valley ’s Hall of Shame.It also suffered from terminal mission creep - with the company investing in everything from residential property , to private schools to artificial wave pools .
"The business model makes sense and it was obviously working for established players," said Tom Dalton, partner at the real estate practice of law firm Dentons. And those new offices were generally pre-let years before staff would ever set foot inside, more often than not to a single multinationals that was looking to house their ever-growing workforce.The Covid pandemic has led to a sea change in our relationship with the office. The surge in remote and hybrid working has meant that employers no longer need to have a desk for every employee.
Instead, it is now set to move staff to a building on St Stephen’s Green, which it is subletting from recruitment firm Indeed."They’re struggling to get away," said Tom Dalton."How much they’re willing to give away is not as attractive from a long-term perspective." According to HWBC, it stood at 14.4% by the end of June - up from around 10% in the same period of 2022.
"Large scale new developments that have happened pre-Covid, all of them were underpinned by tenant agreement under lease, by a single tenant," said Tom Dalton."If you’re trying to get into multi-tenant buildings, it’s very difficult to coordinate them so you have certainty on your build before you start."
High interest rates are a factor in the pull back from investors - but if there are fewer tenants willing to pay big rents, that’s going to undermine the potential for returns too.That’s not to say that there is no demand for new office space - it’s just a very specific type of office that’s in demand.
Today, though, a more modest approach is in vogue - as they look to shrink their physical and carbon footprints in one go.While always an important factor, location is now key - as employers try to make the office as attractive and accessible a location as they can for workers that could do their job anywhere they like.
Wework Bankruptcy Silicon Valley Start-Up Expansion Mission Creep Residential Property Private Schools Artificial Wave Pools Lavish Spending Private Jet Cash
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