Knotel once hoped to be the next WeWork. And as the pandemic rages on, it’s facing similar headwinds as its co-working rival.
The flex office provider is looking to trim 60 percent of its 4.8 million-square-foot global portfolio, and slash its leases in the U.S. and Canada from 3.4 million square feet to just 500,000 square feet, Business Insider reported.
Knotel’s goal is to lower its rent obligations from $15 million per month to $2 million and bring its North American revenue up to $10 million annually.
The company is also reassessing its business model, according to BI. Instead of paying rent to its landlords, it may shift to management agreements wherein it operates the space on the landlord’s behalf, thus sharing in the profits.
Knotel was valued at $1.6 billion in August 2019, but is thought to be worth substantially less now. Its problems — including late payments to contractors and high vacancy rates — predate the pandemic. In January, Knotel axed 20 percent of its staff, the first of three rounds of layoffs in 2020. Most recently, about 20 workers were let go, leaving its headcount at 250.
As Covid persisted, Knotel was hit with lawsuits and threats of eviction due to unpaid rent.
Other flex-office providers have had similar struggles. Breather, a company specializing in renting out small spaces on a short-term basis, has contracted investment bank Moelis and is considering its options for a possible sale or outside investment. And WeWork has recently moved to threatening non-paying members with collections letters.
[BI] — Raji Pandya