The pandemic was harsh for WeWork.
The co-working company reported a $2.06 billion loss in the first quarter of 2021, which it largely attributed to restructuring costs as well as a nearly $500 million settlement with co-founder Adam Neumann. The losses nearly quadrupled from the same period last year, the Financial Times first reported.
As offices stayed close and downtown centers become ghost towns, WeWork’s revenue nearly halved from $1.1 billion to $595 million in the first quarter of this year. Meanwhile, the number of members who pay to use its office space fell from 693,000 in March 2020 to 490,000 a year later.
For anyone who’s followed WeWork’s dramatic rise and fall, it’s a familiar story. But the tale still holds some suspense for investors: Namely, will the co-working company ever make money?
In 2019, after a failed attempt to go public, Neumann was ousted over concerns of a reckless culture, his un-CEO-like behavior, excessive spending, and corporate mis-governance. WeWork went through a major shake up, selling a number of businesses and shedding thousands of jobs. Prior to its collapse, WeWork was valued at $47 billion.
Sandeep Mathrani, the former CEO of Brookfield Properties’ retail group, became CEO of WeWork last February, and has been focusing on slashing costs, reportedly cutting its cash burn rate by half, and re-orienting the business around renting office space. Last year, WeWork received a $1 billion commitment in new financing from majority owner SoftBank. And now, the co-working space is planning to go public again this year via a special purpose acquisition company, BowX Acquisition Corp. WeWork has $2 billion in liquid assets and $719 million of cash on hand.
WeWork, which has 800 locations worldwide, reports it is seeing “encouraging signs of recovery”, as membership has grown since February. The company reported 28 of its 112 total markets have over 60% physical occupancy in April. Meanwhile, in China, membership visits had re-bounded to pre-pandemic levels last year, according to the company.
The future of co-working looks bright in part because big companies are increasingly prioritizing office-space flexibility, Ben Munn, head of global flex space operations at JLL, a commercial real estate firm, told Quartz in February. Before the pandemic, JLL estimated 30% of global offices would be on flexible terms by 2030. A year later, he says the company’s prediction hasn’t changed. That said, flex office providers will need to cut costs and restructure to survive, he said.
More broadly, despite the glut of commercial real estate, pension funds, and private equity firms are once again spending record sums on buildings.
Mull said that WeWork will also need to prepare for increased competition: In-office perks like health and wellbeing sites could become more common, and even hotels and retail sites are looking to expand into co-working. The number of remote workers is expected to grow post-pandemic, and it’s likely that those workers will want more options than WeWork.