Houston relatively safe from WeWork’s potential bankruptcy
WeWork’s 200K sf in city accounts for 3% of its coworking space
WeWork’s potential bankruptcy could exacerbate the struggles of Houston’s office sector, but it won’t be detrimental like in other U.S. cities.
WeWork, one of the nation’s largest providers of co-working space, rents over 200,000 square feet across three buildings in the Houston area, and it closed a downtown location earlier this year. WeWork’s operations in Houston account for just 3 percent of its co-working space, the Houston Chronicle reported.
The New York-based company has taken a beating amid the remote-work movement. Office vacancies have skyrocketed since the pandemic hit, leaving WeWork with practically nothing to offer. Now, the company aims to renegotiate nearly all of its leases to remedy its financial mess, while hopefully remaining in its buildings.
WeWork’s relatively small footprint in Houston is a small win for an office market with an already high vacancy rate of 25 percent.
WeWork recently disclosed that its expenses exceeded $2.2 billion through the first half of 2023, resulting in a loss of $696 million over two quarters. As of last month, the company’s market valuation plummeted to less than $200 million, down 98 percent from its IPO debut.
With the closure of its 708 Main location in Houston earlier this year, WeWork maintains three branded locations in the city: 609 Main downtown, 2700 Post Oak in Uptown-Galleria and 1725 Hughes Landing in The Woodlands.
As the company seeks to recover, it seems to be emulating Common Desk, a Dallas-based coworking chain it acquired last year. Common Desk shares coworking revenue with landlords and doesn’t pay rent, a strategy that WeWork is exploring to reduce its financial burdens.
Should WeWork file for bankruptcy, leases and agreements with landlords may be up for renegotiation or rejection, which could prompt landlords to seek settlements. For Houston’s office market, the potential closure of more WeWork locations would further challenge landlords who are already scrambling to fill vacant space.
“It certainly doesn’t help an already soft market. It’s just a question of whether there are operators that can and will backfill those spaces,” Dan Boyles, an office broker with Partners Real Estate, told the outlet.