UPDATED, 11:39 a.m.: Knotel laid off as much as a third of its New York market-focused staff, as the company faces high vacancy rates and a drop in leasing activity.
Close to 20 people were fired this week from the co-working company’s office at 22 West 38th Street, former employees told The Real Deal. The location focuses on the firm’s New York market, and had between 50 and 60 employees.
The move follows the departure of the firm’s head of corporate finance last week.
A Knotel spokesperson confirmed that the layoffs had occurred but said it was “significantly lower” than a third of the New York office. The spokesperson would not say how many people were laid off, or if more were expected to be let go.
“Knotel has grown from two employees in one city to 500+ people in 17 cities over the past four years to become the leading global flexible workspace platform,” a statement from the company said, acknowledging the layoffs. “Our business will continue to evolve and change to best meet the needs of our customers.”
Employees are expected to hear from leadership today at a global all-hands meeting. Among those let go were sales representatives, customer service employees, a construction project manager and three employees who worked for the firm’s furniture business, known as Geometry, the former employees said. Knotel has a second New York office at 29 West 35th that houses human resources and business operations.
The layoffs come just six months after the firm announced it had reached a $1 billion valuation after raising $400 million. The funding round, which was backed by Kuwait’s sovereign wealth fund Wafra and Japan’s Mori Trust, Itochu and Mercuria Investment, was celebrated at an office party in August with flowing champagne, according to people who attended.
“We thought it was going to make a lot of things better, but things only got worse,” said a former employee.
However, reports of high vacancy rates at the company’s locations have dogged the firm’s performance in recent months. Toward the end of last year, Knotel had 800,000 square feet of vacant space in New York, Crain’s reported. And last week, CNBC revealed that the firm’s leasing activity had dropped 80 percent in the fourth quarter of 2019 to 67,000-square feet.
The recent headlines about the company bring to mind the downfall of Knotel’s biggest competitor, WeWork. In six months, WeWork was forced to abandon plans for an IPO, forced out its CEO and co-founder Adam Neumann, and laid off thousands of employees. WeWork’s largest investor, SoftBank, is in the process of extending a $9 billion lifeline to the company to save it from potential bankruptcy.
Knotel has been similarly criticized for expanding at a rapid rate, without disclosing clear financial performance metrics.
Knotel’s leadership, including CEO Amol Sarva, has previously taken aim at WeWork. At the start of 2019, when WeWork laid off more than 300 employees, Sarva poked fun at the co-working giant, tweeting:
— Amol Sarva (@amol) March 2, 2019
A year later, things have changed.
“There was a lot of shade thrown on other businesses,” a former Knotel employee said. “But it was the exact same business model.”
This is a breaking story. Check back for updates.