WeWork, a former star in flexible office space, is facing a serious crisis that could impact New York City’s already struggling commercial real estate market. With nearly 7 million square feet of space in Manhattan, WeWork’s troubles could worsen the challenges faced by the office market.
Lee Overby, Barclays’ Managing Director and Head of CMBS Research, discusses the situation’s implications. He notes that WeWork’s recent financial filing uses “going concern” language linked to potential bankruptcy. Regardless of the motive, WeWork’s problems will affect the real estate market.
Although WeWork occupies a vast space – over twice the size of the Empire State Building – it represents just 1% of Manhattan’s commercial real estate. High vacancies due to the pandemic are already an issue.
Overby explains that while occupancy decline has slowed, recovery may take a year, though history suggests it could be longer.
Overby’s report highlights risks in WeWork-concentrated areas. Weak office market fundamentals could lead to closures, challenging landlords to maintain property values.
Landlords offer concessions and rent cuts to attract tenants. Converting office space to restaurants or housing faces financial obstacles.
WeWork’s fate reminds us of real estate’s fragility in NYC. As businesses adapt, uncertainty looms for WeWork and the real estate industry.