Coworking giant WeWork has told UK tenants their membership agreements will not be impacted after the firm filed for bankruptcy in the US earlier this week.
WeWork and Adam Neumann are back in the news again as the former CEO attempts to make a comeback promising a new leadership style to save his reputation and his former company. For further updates, watch this (coworking) space…
WeWork has issued a holding statement to UK tenants following a disastrous week for the firm which saw it file for Chapter 11 bankruptcy in the US.
The global coworking space provider – which has been threatening failure following a series of high-profile financial and PR losses – was first reported to be facing insolvency by the Wall Street Journal last week.
On Monday morning, it officially filed in New Jersey, according to a statement from the company. WeWork’s saga marks one of the biggest startup failures in recent decades, having previously been valued at $40 billion back in 2019.
WeWork has 63 locations in the UK, 36 of which are based in London. UK members had previously been left in the dark about what this news meant for their membership contracts, some of which are worth several thousands.
In an email sent yesterday afternoon and seen by Startups, WeWork CEO Dave Tolley reassured its members that “WeWork is here to stay” adding that “your membership agreement will not be impacted by this process.”
When I wrote to you just a few short weeks ago, I expressed my confidence in our future and WeWork’s pledge to put our members first in everything we do. My confidence and our commitment emphatically continue today.
WeWork made the proactive decision to commence a strategic reorganization process to best position the company for future success.
Please note, this process is not happening in your country and we expect there to be no changes to WeWork’s operations there. As our valued members, we want you to hear directly from us that:
- WeWork is here to stay. Our spaces are open and operational, and our team is here to serve you. Throughout this process, WeWork spaces will continue to be operated to the highest standard.
- Our members are our top priority. We recognize the trust you place in us by choosing to work within our community. We remain fully committed to provide our spaces and services to you and ensure your business continuity.
- Your membership agreement will not be impacted by this process. Your membership agreement remains active and we will continue to honor our obligations under your agreement.
- As always, we will continue to communicate with you. While we continue the necessary process of working with our landlords to improve our lease portfolio, we plan to remain in the vast majority of our buildings and are committed to communicating with members first and early should we foresee potential changes.
We are undertaking this strategic reorganization by filing for protection under Chapter 11 of the U.S. Bankruptcy Code, along with recognition proceedings in Canada. Chapter 11 is a valuable legal tool that enables companies to restructure their financial position while they continue day-to-day operations in the ordinary course. For WeWork, we expect this process to best position our company stronger and operational and financial success, and best enable us to continue to deliver world-class services to our members.
We have already completed an important early step in this process by entering into a Restructuring Support Agreement with our key creditors that drastically reduces our existing funded debt, ensuring we can sustainably invest in our product offerings and workspace solutions for many years to come. You can read our full announcement here and find additional information at we.co/memberfag to answer your most immediate questions.
From all of the employees of WeWork, to our more than 500,000 members around the world, thank you for your trust in us as we take these critical steps to strengthen our company for the long term.
We are grateful you’re a part of our community. We do not take the opportunity to work with you for granted, and look forward to seeing you in one of our spaces again soon.
With gratitude,
David Tolley
Chief Executive Officer, WeWork
Will WeWork’s members be able to keep working?
Tolley’s bullish outlook for the future of WeWork may not be enough to alleviate the woes of many WeWork members, however, many of which are startups or small businesses with limited cash flow to risk.
Media updates of the firm’s financial troubles have been well-documented, and many have their doubts about whether to stick with the provider or move elsewhere. Between Q1 and Q2 2023, the firm reported a global drop in physical memberships of around 29,000.
Calum Russell, CEO of Flexible Workspace operator Covalt, comments: “WeWork’s problems were well known. From the outset many within the industry were saying that the company was entering into an excessive number of onerous leases and over-leveraging.”
The good news for members is that, as the WeWork tower has slowly begun to crumble, many other cheap coworking or flexible office space providers have stepped in to provide competitively priced services with significantly strengthened margins.
This means SMEs searching for flexible office space still have plenty of options to choose from. Even if WeWork begins scaling back its lease holdings in the UK, which remains a possibility, new operators will likely be quick to step forward and fill the gap.
“WeWork’s problems are unique to them,” adds Russell. “The recent headlines about WeWork belie just how well the flexible office market has performed recently. In London and other major cities like Manchester, the market continues to go from strength to strength.
“WeWork is not a bellwether, or a synonym, for the sector. We are yet to know the full extent of the WeWork fallout, but we can be certain of one thing – flexible office space is here to stay.”
