Wework is one of London’s biggest tenants — what could a potential collapse mean?

A possible collapse of flexible workspace space provider Wework could send London office vacancy levels close to 10 per cent, in a fresh blow to the capital’s commercial property sector. 

According to new figures seen by City A.M. from real estate information firm CoStar, the number of office vacancies in London currently sits at 9.2 per cent, but this could rise to close to 10 per cent if the troubled company goes bust. 

Wework is London’s biggest tenant, currently representing 0.8 per cent of offices in the entire office market. It currently has 44 sites and supplies over three million square feet worth of space to employees across the capital. 

But the trendy workplace provider has recently found itself in hot water, with US reports suggesting that the company could file for Chapter 11 Bankruptcy as soon as next week.

The firm has been battling a substantial debt pile for quite some time and earlier this year flagged ongoing concerns and worries to investors.

Wework was once one of the fastest-growing businesses in the world, but it has been hit hard by the rise of home and hybrid working, which has reduced demand for office space. 

It’s thought that bankruptcy protection in the US would give the firm some time to perform open-heart surgery on its finances.

A possible collapse of the firm would also rock London’s office market which has struggled following a post-pandemic push to hybrid working. 

The BBC reported on Thursday that Wework would not confirm how many UK sites would be closing, however, it did say it would be closing one of its central London locations near Blackfriars station.

Members of the office told the outlet that they were told to leave the office by 30 November and that Wework would provide alternative accommodations.

However, a leasing agent at one of London’s top commercial property firms told City A.M. that landlords who house Wework sites will likely get another operator to run those centres rather than having a vacancy. 

They said: “If it’s a good quality building, I think their prospects for releasing will be high, given a shortage of good quality stock, or the alternative would be getting in another coworking serviced office operator to actually run it instead.”

Russ Mould, investment director at AJ Bell, said: “A number of landlords will be watching Wework’s latest financial contortions with concern, although this is an accident that they will have seen coming from some way off, given how the American firm’s share price has done nothing but slide since its (delayed) initial public offering in 2021.

“Helical even declared a number of leases forfeit[ed] last week for non-payment of rent at a specific building, although a new licence was swiftly renegotiated on a short-term basis. 

“Helical has noted it will have more to say on The Bower property at its results on 22 November and shareholders in real estate firms with exposure to Wework will be looking for guidance on how any potential voids can be filled if, as and when they occur.”

Just last night reports revealed that landlord Helical cut its individual leases for six floors of Wework office space at The Bower in London on Friday last week due to a non-payment of rent for the September quarter Co-Star reported.

Since then, Helical allowed Wework to re-enter the building, because they entered into a short-term lease agreement with Wework and received a fee equivalent to the whole of the September quarter’s rent and service charge due “under the terms of the previous contractual arrangements”.

Helical said in a statement on the London Stock Exchange: “Helical is working on next steps for the space and will provide an update when the half-year results are announced on 22 November.”

Wework told City A.M. that it does not comment on speculation.