New York-based flex-office provider WeWork has reduced rents at many of its properties amid the prolonged COVID-19 pandemic, according to an analysis by Bloomberg News.
The co-working giant recently reduced its rental fees in by an average of about 10 percent. In some places, rents fell by as much as 25 percent.
The company reduced rents by 15 to 20 percent in Austin, Boston, Denver and New York City. In Chicago, rents were reduced by 24 percent, while they were cut in Detroit by 25 percent.
In the second quarter of 2020, overall US flex office space leasing activity was down 45% year-over-year, according to a report from CBRE. Just this week, co-working space Knotel filed for bankruptcy, claiming that tenants have stopped paying rent. It’s due to be acquired by Newmark Group.
Unlike traditional offices where tenants are locked into a long-term contract with the landlord, many flex-office providers have short-term contracts with their tenants.
However, there is a silver-lining for the once hot co-working startup. Many commercial real estate brokers expect greater demand for shared office space as more companies opt for flexibility and remote working arrangements for their workers. In fact, commercial real estate firm JLL estimates that 30% of global offices would be on flexible terms by 2030.
If WeWork can hang on until things get better, the pandemic may be the cataclysmic event that finally validates its flex office space model.