The bankruptcy of WeWork challenges the claims of a co-working revolution

In its heyday a few years ago,
WeWork said it would reinvent offices. But the company never created a sustainable business or changed how most people worked.
The business of offering flexible office space on short leases to individuals and businesses, a model that WeWork hoped to make mainstream, remains a niche in commercial real estate despite the billions of dollars the company and others invested in the approach. Flexible office space accounts for less than 2 percent of all office space in the 20 largest U.S. markets, according to Cushman & Wakefield, close to its share before the pandemic. WeWork filed for bankruptcy protection this week in an effort to quickly slim down its portfolio of office spaces. The company wants to give up over 70 leases right away, with possibly more to follow. Other co-working companies may take over some of those locations, but some owners of office buildings said they were not expecting this approach to ever amount to more than a small part of their business. Many employers are paring back their office space because workers aren’t going in five days a week after growing accustomed to working remotely or on a hybrid schedule. Office vacancies are at their highest level in decades, with lots of space available for sublet often at a deep discount from the rents that prevailed before the pandemic. WeWork’s bankruptcy will only make the situation worse by leaving landlords with more space to fill. Michael Emory, the founder of Allied, a real estate investment trust that owns office buildings in Canada’s largest cities, said flexible office providers would always exist, providing space for smaller companies to operate without signing long leases.Rather than leasing their space, some co-working companies base their model around operating offices for a set fee or a percentage of the profits, which reduces their risk and financial obligations. Co-working firms using this model anticipate continuing to do well in the age of hybrid work as more employers seek flexibility and shorter leases for their office spaces. They expect demand to remain strong as companies adapt their return-to-office plans and implement changes related to remote work policies. Even with WeWork’s bankruptcy, it is anticipated that the demand for flexible office space will remain robust.