What will happen to WeWork’s Marin County offices as dozens of locations are closed?
One of the world’s largest owners of flexible-term office space is vacating dozens of locations in another round of cost-cutting measures, but WeWork said its Marin County location won’t would not be on this list.
The New York-based company, in its third-quarter earnings release Nov. 10, said it would close about 40 “underperforming locations,” totaling about 41,000 jobs, mostly this month. But Greg Rosso, Bay Area director for the New York-based company, told the Business Journal that its 35,000-square-foot Marin location in the 1 Belvedere Place office building in Mill Valley could hardly be described in terms of this way.
“Our flagship Mill Valley location, among other suburban markets, has had outstanding results for North Bay members,” Rosso said in an email Tuesday. “While companies are providing location flexibility to their employees, we are now seeing once distributed teams come together in person. The positive energy in the office is palpable.
He declined to say what would happen to the other two dozen WeWork centers in the Bay Area, where the company collectively has 2 million square feet of space.
Demand for office space, especially in urban areas, plummeted early in the pandemic as employers shifted jobs to remote work where possible, The New York Times reported.
WeWork touted the move away from traditional office spaces as an opportunity for the company’s “flexible model,” as CEO Sandeep Manthrani said during the quarterly conference call, the publication reported.
WeWork’s business model is to lease office space which is in turn leased to individuals, small businesses, or corporate groups for generally shorter terms than those offered by traditional commercial space owners. .
These flexible spaces currently account for less than 2% of office real estate, but this is expected to rise to around 30% by 2030, according to a projection by commercial real estate company JLL.
WeWork offers different levels of private spaces as well as services such as network connections and refreshments. The company’s plans at the Mill Valley site include All Access ($299 per month) and On Demand ($29 per day).
But the share of the WeWork space occupied globally by large companies fell to 47% in the third quarter, from 49% a year earlier, according to the Times.
Nationally, demand for office space has recovered faster from the pandemic this year in suburban markets and those with clusters of life science companies, as these areas tend to have faster return-to-office momentum from employers and reductions in public health restrictions, according to NAIOP, a North American trade group for commercial real estate professionals.
But California, like New York and some other major US cities, has followed the rest of the nation in scaling back those policies. It wasn’t until earlier this year that the Golden State moved to an “endemic” approach to the virus, and Sonoma County in February was the last county in the state to drop restrictions on public meetings. , reported The Press Democrat. The state also let its indoor mask requirement expire at that time.
WeWork has been accused of growing too quickly and too expensively, and the cost-cutting was part of a months-long effort to cut its cash outlays, according to The New York Times. The company spent $915 million in the first nine months of this year investing and operating the business, leaving it with $460 million in cash at the end of the third quarter in September.
The company has become increasingly owned by its benefactors, Japanese conglomerate SoftBank and a SoftBank-managed fund, which have provided billions of dollars in funding to support WeWork as it adjusts.
WeWork suggests demand for short-term office space is returning to the Bay Area. Rosso would not specify occupancy rates — a measure of space utilization — for the Mill Valley center or in the Bay Area.
However, he said the company’s locations in the San Francisco market, in which the company includes Marin, had an 80% occupancy rate, up from 75% in August, according to the latest market figure provided by Rosso. .
And in the first 10 months of this year, this market saw an 83% increase in total reservations for All Access members and more than 130% for On Demand users, Rosso said.
“We continue to see Mill Valley operating in the same way as our more suburban locations as employees seek to reduce commute times while continuing to work in high quality Class A spaces outside of their home office” , said Rosso. “The flexibility offered by WeWork continues to provide them with this ‘third workplace’ option close to home, schools and neighborhoods.”
The company opened the Mill Valley site in early 2019 and in early 2020 expanded to an additional 26,000 square feet in the adjacent building. But as the pandemic reduced office occupancy, WeWork reduced its Marin footprint to a single building.
WeWork has 728 locations open and set to open in 119 cities across North and South America, Europe, Africa, Asia and Australia.
By comparison, IWG Group, which operates Regus, Spaces, HQ and other flexible space centers, has around 30,000 locations in 175 countries. The group has several North Bay locations in Napa, Marin and Sonoma counties.
Jeff Quackenbush covers wine, construction and real estate. Before joining the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Contact him at firstname.lastname@example.org or 707-521-4256.