Will WeWork expand again?
Direct expansion is not planned at this stage. Most newly planned locations were abandoned during the Chapter 11 process. WeWork wants to avoid capital-intensive investments for the time being, and will only consider new locations if they quickly pay for themselves.
Expansion through partnerships possible
However, there is still room for more locations, with future expansions potentially through independent franchises or joint ventures that require less capital from WeWork. For example, 18 new openings are planned in India this year through the local franchise partner. IWG, a competitor, is also currently growing its brands primarily through such models.
What is WeWork worth today, and who runs the new company?
The new WeWork is valued at $765 million, a fraction of its once fictional peak valuation.
Sixty percent of the restructured company is now owned by Yardi. SoftBank, once the dominant owner, remains a minority shareholder.
Yardi is not an unfamiliar partner for WeWork. The company provides software for managing real estate, including coworking spaces. The two companies have been working together since 2022 through the WeWork Workplace app, a relatively new revenue stream for WeWork.
Last year, Yardi became a senior secured lender to WeWork to help fund the company's restructuring, which was underway at the time. This made Yardi a creditor. Going forward, the company will be represented on WeWork's board of directors.
Aside from the announced shift in focus to small businesses, Yardi has made more general statements about its future strategy. WeWork will operate as an independent company, separate from Yardi's core business. And the key components of WeWork's business won't change. The new CEO is John Santora. He brings more than 40 years of real estate consulting experience from his time at Cushman & Wakefield.
Conclusion
WeWork emerged from bankruptcy free of costly debt and is now operationally profitable. Next year, the company expects to be fully profitable for the first time.
Cash flow is planned to grow each year to ensure sustainable operations. To achieve this, WeWork plans to generate the required incremental profits by increasing revenue by approximately 5% annually while limiting expense growth to 3%.
WeWork's goal for increased revenue is to better utilize its private workspaces without general price reductions. Instead, they are shifting their targeting to attract more small businesses as members.
The success of the plan is not guaranteed, as it is only broad and cannot account for unforeseen developments. However, the bankruptcy court found the plan to be realistic and approved it.
One risk could be that occupancy rates in individual office markets do not increase without price reductions, for example if the prices of other office properties in the vicinity fall. Another risk would be if, despite planned investments, existing locations were to lose value and possibly appeal. In both cases, however, WeWork's planned cash reserves could allow it to counteract or slow the growth of its cash reserves.
Ultimately, it will depend on how WeWork implements the plan in detail and markets its workspaces in future.
According to the Global Coworking Survey, a social, enjoyable atmosphere is the most important factor in choosing a coworking space. This means that for WeWork, as for many other coworking spaces, its communities, or members, are one of its most important assets for any detailed plan.
More and more commercial properties are vacant, and many leased offices are often underutilized and have lost much of their social appeal. However, people still need places to work outside the home. As a result, social atmosphere is becoming an increasingly important factor that WeWork and other coworking spaces can use to differentiate themselves from other competitors in the office market.
