WeWork will become a smaller – and potentially rights-owning – company. After a final hearing on its bankruptcy plan Thursday morning, the coworking pioneer will have fewer locations, a modern influx of capital and $4 billion in debt wiped from its books.
In a packed courtroom in Newark, Up-to-date Jersey, Judge John Sherwood approved WeWork’s restructuring plan. WeWork expects to finally emerge from bankruptcy in mid-June. The plan also stopped a bid by controversial WeWork founder Adam Neumann, who had tried to buy back the company he founded before he was infamously fired.
WeWork’s tidy slate will coincide with a modern era of work in which office workers resist returning to full-time work; almost at the end of 2023 20 percent office space in the US remained empty. However, employees also experience this more lonelinessit’s a problem coworking companies believe they can solve by bringing people closer together. The WeWork restart is a test of the future of coworking itself.
“WeWork still believes this is a viable business model,” says Sarah Foss, global director of legal and restructuring at Debtwire, a financial services company. “They are leaving a much leaner company.”
In November, WeWork filed for bankruptcy. Hit by high interest rates and the Covid-19 pandemic that ushered in the work-from-home phenomenon, it was left with too many leases, too many scorching desks and pliant office spaces it couldn’t fill. In 2023, rental costs accounted for two-thirds of operating costs.
Before filing for bankruptcy, WeWork had more than 500 locations worldwide and will eventually operate approximately 330 WeWorks, about half of which will be in the U.S. and Canada. The company estimates this will save WeWork approximately $12 billion in rent obligations, cutting rental costs in half. WeWork’s plan is to amend or assume many of its leases and reject or negotiate an exit from about 150 others. The priority was to reduce coverage in areas where there was oversupply due to too many floors being occupied in the same building or having multiple locations nearby.
Many of these changes are part of Chapter 11 bankruptcy filings, but locations outside the United States and Canada are not part of this package. In other countries, WeWork works with landlords renegotiate certain leases, including in Singapore, Kuala Lumpur, Bangkok, Ho Chi Minh City, Jakarta, Manila and Paris.
During the process, WeWork contacted hundreds of landlords to negotiate modern lease terms or exit the buildings. Bankruptcy allows companies to renegotiate and immediately reject leases, but the market conditions currently plaguing office landlords have given WeWork the advantage of negotiating better terms to stay in place. “They have the advantage of knowing that we’re in a terrible time for property owners,” says Eric Haber, general counsel at Wharton Property Advisors, a Up-to-date York office leasing advisory firm. Now thinner, WeWork has “a simplified setup where they hope to make money, but the outlook is very optimistic,” Haber says. “Even with this much better setup, they still have to make it.”