WeWork, which operates 11 locations in metro Atlanta, said it will have to consider selling assets, reducing business activities and “obtaining relief under the U.S. Bankruptcy code” if its financial situation does not improve, according to the filing. The news spurred a sell-off of the company’s stock, which reached a new low of $0.12 per share by Wednesday afternoon.
Since reaching a peak of $13.02 in October 2021, WeWork shares are down 99% in that time.
A company spokesperson told The Atlanta Journal-Constitution it has 623,000 square feet of leasable workspace under its control, ranking WeWork among metro Atlanta’s larger office operators. That’s nearly as much space as the office component of Ponce City Market.
The company declined to comment on Atlanta impacts but said its metro office spaces remain open. WeWork Interim CEO David Tolley told investors Tuesday the company is forging forward with its transformation plan that’s been in place in 2019.
“We are confident in our ability to meet the evolving workplace needs of businesses of all sizes across sectors and geographies, and our long term company vision remains unchanged,” Tolley said.
WeWork designs its offices and subleases space typically on short terms. Members can also use WeWork locations in other cities.
At the end of June, nearly a third of all office space in metro Atlanta was either vacant or available for sublease, according to real estate services firm CBRE.
The disruption in office market demand has hit the entire country. Phil Mobley, the national director of office analytics for CoStar, said the shock has effectively wiped out demand for 44 million square feet of offices — roughly the size of Los Angeles’ entire stock of offices.
“We’re missing our fourth-largest office market in terms of demand,” Mobley said Tuesday during a webinar on office trends. “A lot of that excess occupancy is on the sublease market, which is where we’ve seen just an incredible trend upward in sublease availability.”
Co-working space has historically catered itself to freelancers and startups, but large corporations are beginning to fold flex workspaces into their office options, according to a recent report by real estate services firm JLL report. It cited an internal study which found 41% of tenants expect to increase their use of flex workplaces as part of their post-pandemic strategy.
Since it was founded in 2010, WeWork rocketed to stardom behind its then-CEO and cofounder Adam Neumann. But the resulting crash back to Earth has been etched into the history books, spawning documentaries, fictional miniseries and academic case studies.
WeWork’s initial public offering was delayed in 2019 over questions about Neumann’s management and the company’s prospects for profitability and the cofounder was ultimately let go. The company went public two years later, but it’s only seen its stock tank while struggling to turn a profit. The company reported a $397 million loss in the most recent quarter. WeWork ended June with roughly $680 million in reserves.
The pandemic’s impacts on the office market have only exacerbated the company’s struggles. WeWork’s occupancy dropped from 79% at the onset of the pandemic to 47% by the end of 2020, according to JLL. At the end of June, that figured had recovered to 72% across the company’s worldwide portfolio of 777 locations, according to WeWork. But Tolley said that’s lagging company expectations.
“Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships,” he said.
WeWork laid out a series of four goals that will prove crucial over the next year. The company said it must reduce its rent and tenancy costs, reduce member churn to increase sales, gain control over increasing expenses and seek additional capital.