WeWork is scrapping plans to move into a major Manhattan office it agreed to lease nearly two years ago.
The struggling co-working firm was set to move into a 115,000-square-foot spread at Columbia Property Trust’s 149 Madison Avenue in Midtown South this year. Terminating the deal may now cost WeWork millions, Business Insider reported. WeWork had planned to retrofit the office, for which the landlord set aside $15.9 million.
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As the coronavirus spread, offices across the country sat empty for the better part of the last three months, putting pressure on landlords and tenants alike. WeWork has sought to renegotiate rents and lower costs in a bid to turn around its real estate portfolio, as flexible-office space firms struggle to meet their obligations. CEO Sandeep Mathrani said the firm was rethinking nearly 20 percent of its leases.
In May, IBM announced it was leaving a 70,000-square-foot space it leases from WeWork at 88 University Place, although the technology company said the move was unrelated to the coronavirus. The IBM deal had marked a milestone for WeWork, as it sought to appeal to mid- to large-sized companies, not just freelancers.
In 2019, the Onni Group secured the co-working giant as an anchor tenant following its $628 million acquisition of the Wilshire Courtyard office complex in Los Angeles — but WeWork had not paid rent on its 335,000-square-foot lease as expected in May. The lease ultimately sent Onni into default on the property’s loan this month.
Earlier on during the coronavirus outbreak, WeWork faced a backlash from its renters, who called the company’s continued charging of fees during the pandemic “unlawful.” The company said it must keep offices open for those of its users considered essential.
Last month, WeWork’s valuation fell to $2.9 billion, a far cry from $47 billion a year ago. [Business Insider] — Georgia Kromrei